OCI Revised Organizational Constructs, Part III

 Specialization and The Division of Labor

Without ERP software focused on delivering profitability everywhere and always there is no way in which to organize today’s society in a profitable direction. This is proven through the quality of the ERP systems used in oil & gas today and the systemic lack of profitability throughout the industry in what we refer to as the “modern day software bug.” We should note here that People, Ideas & Objects, our user community and their service provider organizations target market for the Preliminary Specification is the North American based production profile. We are focused on providing an industry wide solution, that upon reading the Preliminary Specification in full, you may agree it demands participation from all producer firms. In the categories of the junior and startup oil & gas producers, the advantages we provide their organizations ensures they’ll prosper and grow. They’ll have distinct competitive advantages over the methods of organization provided under today’s business model. We also know that consolidated producers are not how the industry will survive. It will be the small and startup sectors of the industry that will rejuvenate the industry. It was discovered in our research that the level of innovation attributable to the small and medium sectors of an industry were as substantial as what the larger sectors contributed. Although the larger sectors contributed larger amounts in total spend it was no greater than the effect of what these other sectors contributed. 

The producer organization that we define and support in the Preliminary Specification sets out to employ and deploy much higher levels of specialization and division of labor. We believe the overhead costs of the producers demand these be dealt with by making producer organizations more efficient through the application of an advanced, and continually advancing, specialization and division of labor. We also turn producers' overhead costs from a fixed, producer based, capacity and capability, into a variable, industry based, capacity and capability. The overheads variable behavior being based on a Joint Operating Committees ability to produce profitable production. 

What the Preliminary Specification defines and supports is a reallocation of the producers administrative and accounting resources into the service providers who are headed by one of the People, Ideas & Objects user community members. Our user community and their service providers are independent businesses that are specialized on one administrative or accounting process and conduct that process on behalf of the entire North American oil & gas industry as their client base. Whereas if that Joint Operating Committee was producing for that month, under our decentralized production models price maker strategy, we can reasonably assume it’s profitable. Then the processes that are specifically administered by each of the service providers will be invoked and their associated billings for each process will be charged directly to the individual Joint Operating Committees. If the property is not profitable then the producer will shut-in the production and none of the service providers will receive any data from our task and transfer network and therefore no accounting or administrative processes will be conducted and subsequently no service provider billings will be rendered. The shut-in property therefore does not incur a profit or a loss, but a null operation. In either scenario overhead costs are covered in the current period through either profitable operations or the fact the cost behavior is variable under the Preliminary Specification, and as a result not incurred. 

Producers today defer the recognition of overhead costs by capitalizing on average 85% of their overhead to property, plant and equipment and recognize them through depletion over the course of the subsequent decades. Leaving them looking for the cash necessary to pay next month's overhead costs as the current month's overhead costs are never included in the costs passed to the consumers. And hence the producers' past excessive demand for annual investor injections of financial resources. This error in basic cash management continues unaddressed today as overhead is where their executive compensation skeletons are hidden. The lack of transparency on these costs is due to the remaining uncapitalized overhead costs realized in the financial statements do not rise above the point of materiality.

There are many benefits for producers to begin operating in this manner. First they will reach their optimum profitability when losses are no longer diluting profitable properties. When all costs are variable, production will be profitable at 25%, 100% or at any level of their production profile. This also preserves their oil & gas reserves for a time when they can be produced profitably. Those reserves no longer have to carry the incremental costs of the losses that would otherwise have been incurred if they continued to produce unprofitably. The commodity markets will find the marginal price when the unprofitable production is removed from the marketplace. Increasing the value of all the producers' production. Keeping the commodity as reserves can be seen as an affordable means of storage as opposed to incurring the costs of production and storage or what may be sold unprofitably. 

Producer officers and directors assert the Preliminary Specifications price maker strategy is collusion. If making independent business decisions at the property level, based on detailed, actual, factual, standard and objective accounting information that is determining profitability is collusion, then? Once they realized their collusion claims were moot they stated unequivocally that they could never shut-in any production, it would cause the formation to “fold over on itself” or other such excuses. That is until they ran the oil price down to negative $40 in April 2020. Refineries had to tell them they wouldn’t take anymore, forcing production to be shut-in. Upon resumption of the covid induced shut-in level of 25% of the global production profile, producers reported there was no reserve damage whatsoever. There stands today no justifiable reason not to implement the Preliminary Specification. Oil & gas commodities are price makers, not the price takers the producers assumed they were for all these decades. The one critical aspect of a price maker is that they will only bring on new production when it’s profitable. This method we’ve developed is detailed further in the Preliminary Specifications Preamble. It is a direct result of the reorganization through a hyperspecialization of these resources in the service providers noted above.

The question is asked regarding heavy oil production. These operations are not able to be shut-in as the process dictates constant production. Shut down and start up costs would be somewhat terminal to the operation. There is also the argument that they’re not operated in the same manner as a conventional or shale Joint Operating Committee. Including their ERP systems which are quite different from the oil & gas producers. The question therefore is why wouldn’t this preclude them from participating in the costs of the development of the Preliminary Specification? Their production profile is in excess of 4 mm boe / day and are therefore significant benefactors of the industry activities in ensuring that all production is produced profitably. People, Ideas & Objects' alternative question is why would the heavy oil producers be allowed to benefit in such a material way on a free ride basis. 

Overall our decentralized production models price maker strategy invokes a high level of production discipline within the North American oil & gas industry. Achieving maximum profitability can only be gained through the fact that unprofitable properties dilute corporate earnings. Therefore the need to ensure they are fulfilling their primary task of maximizing profitability becomes the predominant method of production discipline. In order to compete in the capital markets of the 21st century will be much different than what it was in prior years. With technology and other industries providing growth opportunities, for oil & gas companies to argue they are in a growth mode precludes them from that competition. They are a primary industry with commodities that are subject to the price maker principles of economics. This will also affect producer's capital allocation and capital discipline. Capital investments will only be made with the assumption or demand that they be immediately profitable, and why would they invest in them if they can’t achieve that criteria. This invokes a far different criteria as to what is done in the industry and we can cast the foolishness of “building balance sheets,” “putting cash in the ground” and the like to the scrap heap of history. 

The producer's 2020 / 2021 consolidation route is contrary to every possible reality on the ground in the business world today. Concentration of the bureaucracy is not going to resolve what has afflicted the industry for the past four decades. Rebuilding as People, Ideas & Objects propose will involve a dynamic industry based on a decentralized, connected environment such as the Internet provides. Hierarchical strata of advanced paper shufflers is a future failure, best defined. To bring about an ERP system for the industry such as the Preliminary Specification provides; must consider the opportunity of what is commonly referred to as disintermediation and the tried and true specialization and division of labor principles. 

However, bringing one of the most complex systems into one of the most complex industries into the environment of the small and startup producer is foolhardy to consider. How could that ever be a commercial software product? Or be provided to a commercially viable small, junior, intermediate and integrated oil & gas producer? And that is the fact of the issue. We need to ensure the future of the industry is in the hands of the oil & gas men and women who will knock down the barriers that stand in their way, just as so many have done before. The constraints and reality of just the regulatory, compliance and investment demands are real and an impediment to these needs. That is, if small and junior producers could not access the kind of systems necessary to operate in that capital environment, no matter their size, the capital markets will remain forever closed to them. An untenable barrier today that will be even greater in the near future. Effectively shutting the door on a large portion of the innovative nature of the industry.

Under the Preliminary Specification a startup or junior producer would no longer need to establish the point where they’ll have to generate the excess of $3 to $5 million of free cash flow necessary to offset the annual base overhead of the firm. For the administrative and accounting they’ll only be incurring the variable overhead costs of the service providers fees when and if used. The service providers are there to enhance the explicit knowledge contained in our software with their tacit knowledge they provide as their services. It is a variable cost, industry based capacity and capability available to the industry in the form of Cloud Administration & Accounting for Oil & Gas. Not only are these overhead costs variable, but if they’re incurred that denotes profitable production, indicating these costs are covered, or the property is not producing and as a result not incurring any of these overhead costs. At the same time, due to specialization and the division of labor, all firms in the North American industry will be fully capable and have the administrative capacities available to deal with all of their needs through these service providers. And there are more attributes of our system that provide benefits for the new oil & gas industry People, Ideas & Objects, our user community and their service provider organizations are building. 

People, Ideas & Objects have identified new cost structures that will diminish the performance of the producers. These include the costs of:

• Recovering the past property, plant and equipment account balances, or as we describe them, the unrecognized capital cost of prior production. Whereas if recognized today and passed to the consumer it would provide incremental cash flow via our decentralized production models price maker strategy to provide dividends in compensation for the past excessive reliance on investors. And reduction of bank debt that predominantly supports the property, plant & equipment account.
• The refurbishment of the infrastructure as it stands today. 
• The rebuilding and expansion of the infrastructure. 
• And finally the looming and escalating reclamation costs of the industries past. 

The producers have incurred each of these costs as a result of providing for the consumers energy needs. Without a means of passing these capital costs incurred in a capital intensive industry on to the consumers, such as the Preliminary Specification does, they will bankrupt the industry, or their investors under the officers and directors current and consolidated business model. These form the legacy of the producers in terms of the property, plant and equipment balances which we’ve determined are not transferable out of the corporation. Taking on the expansion of the infrastructure may be the largest of these costs, and I would suggest the greatest opportunity for all concerned in a dynamic, innovative, accountable and profitable primary oil & gas industry, and most specifically the secondary and tertiary industries. 

The Preliminary Specification implements specialization and the division of labor across the producer firm and most particularly in the earth science and engineering capabilities and capacities of the producer firms and industry overall. We list this as the first step in our solution for the startup and junior producers. These capacities and capabilities are becoming increasingly burdensome to each of the producer firms due to their unshared and unshareable nature, but for different reasons from the administrative and accounting difficulties mentioned. The costs incurred to maintain these capabilities are growing as a result of the advancement of their science and technological development which demands further specializations be undertaken within each of the producer's capabilities, and critical competitive advantages. We believe that all producers have reached the point where the demands to maintain these capacities and capabilities have expanded beyond the usable population of these technical resources. Or will soon. With the retirement of the brain trust of the industry, and the universities not producing anywhere near the replacement number necessary, the increased deliverability and greater demand for the technical resources for each incremental barrel of oil produced a critical shortage will soon demand that these technical resources will become too rare, too costly and too unavailable to maintain, not to mention, unable to expand the deliverability of the North America based industry. 

In addition to this limited technical resource supply we also believe that the producer firms are at a point now where the costs of their scientific engineering and geology needs are growing beyond their commercial grasp. Nonetheless, a decidedly higher level of specialization and division of labor will be needed in the areas of earth science and engineering in order to increase its throughput from this resource. It is the unshared and unshareable makeup of these capabilities that we find the difficulties once again. Producers need these technical resources for a variety of just-in-time purposes, as operators, for their highly technical areas. If we assume that across the industry the utilization rate of these technical resources are at 75% due to organizational inefficiencies. Then by releasing that other 25% and deploying that unused and unusable capability more effectively we’ll have what I believe to be the second aspect of the solution of these pending and most certainly future difficulties. Achieving a minimum of a one third increase in the capacity with higher output from improved specialization and division of labor, providing us a good start to solving this difficulty. The question therefore arises what are the producers distinct competitive advantages. They are their land & asset base, and the coordination of the markets earth science & engineering resources.

People, Ideas & Objects et al have implemented a variety of changes within the Preliminary Specification. The first is to consider the producer firm from the time the Preliminary Specification is operational, to have two sources of continuing revenues. The oil & gas sales and the revenues earned by all of their earth science and engineering capacities and capabilities being deployed and employed in the form of a revenue generating capacity. Whether that be to one of the producers own Joint Operating Committees, or in the consulting of the individual to other producers / Joint Operating Committees, as a client, of which they may / may not have an interest in. Due to the specialization and division of labor demands producers will need to have chosen to specialize or acquire a specific capability on the basis of the distinct specializations and competitive advantages they hold or desire. These producer specialized technical revenues will then offset these engineering and geological costs incurred and will be directly charged to either their Joint Operating Committees or other producer clients who need to augment their needs with other specialized services. 

In terms of an opportunity in this new oil & gas industry this second source of technical revenue may be seen as the initiation of the start up oil & gas producer firms' initial revenues. More than that they’ll be able to offset some of the additional costs of the head office burden that are not considered part of the Cloud Administrative & Accounting for Oil & Gas. And this will apply to all producers no matter their production profile. When producers are specializing on their distinct competitive advantages, and all producers including Exxon, Shell and Chevron will need to do so, the demand for outside technical resources will be required to augment their diverse needs. The ability to offset some of their engineering and earth science costs with direct revenues of a non oil & gas revenue source. And the ability to access only the administrative and accounting software and services they need when they need them works to defer much of that base load $3 - $5 million dollars of overhead that is an inhibiting factor to the startup and junior oil & gas producer success. 

In a world where software has to define and support the organizations that exist. This is some of the “what, how and why” we’re able to provide North American oil & gas producers when the Preliminary Specification is delivered. The facility most responsible for this capability of making direct labor charges to the Joint Operating Committee is what we are implementing in the industry is our Work Order. Officers and directors may claim that charging labor directly is already available through the systems they use. Which is true they are able to allocate their labor costs to the field. However not with the necessary features of raising it to the point of making it a defined technical revenue stream of the firm. And the feature of making it a system that interacts throughout the industry. Allowing for the interactions between the resources they need and where they need them. Subject to the appropriate approvals and governance. Or enabling the second defined purpose of the Work Order system in order to enhance the industry wide innovativeness through the establishment of working groups etc. Our Work Order system is able to bill its costs at all times to either corporate overhead, Joint Operating Committees AFE or to a lease. Therefore the billable time of the individual engineer or geologist would be deployed within the producer 100% of the time they were working for the producer. And this is an inherent part of people beginning the establishment of their own producer firms which rely on their talents of their much needed earth science and engineering capacities and capabilities, not their skills in attracting capital.

Oracle CloudWorld 2022 Conference

It was during this conference where Oracle announced what I consider to be the next phase of the Enterprise Resource Planning (ERP) evolution. My perception of what was announced is a new direction where the overall technological architecture is accepted as mature and capable to undertake this phase and that technology can begin to bring substantial value to clients through Oracle Cloud ERP. When I look at the overall landscape in business today I see many decades of iterative development work that can be done which is similar to what is now available for the North American based oil & gas producers by adopting the Preliminary Specification. It may be that we are beginning what will be considered the era where the promise of Information Technology is realized. 

There is a specialization and division of labor between Oracle and People, Ideas & Objects, our user community and their service provider organizations. Oracle is focused on building value for their clients through the development and implementation of generic business processes, applying the principles of specialization and the division of labor, standardization, objective process management and automation to. The Preliminary Specification focuses on these same methods to develop value for North American producers in the oil & gas business. Therefore the combined approach of Oracle and People, Ideas & Objects et al are covering off all aspects of the producer's business needs. Such that we state “It’s not enough to own the oil & gas asset anymore. It’s also necessary to have access to the software & services that make oil & gas profitable.”  The significance of Oracle CloudWorld 2022 is that any operation in any business across the globe will need to operate on Oracle Cloud ERP or face the inability to compete or profit from their operation. I do not see a viable alternative available in the market.

How We Should Define Failure

 I can announce today that the Committee to Herd Cats has been unable and unwilling to support the development of the Preliminary Specification. The extent of their confusion extends to the fact that I’ve received no communication from them at any time. We can read many possible alternative suggestions as to why this may have occurred, a panic has driven them to inaction, they’re satisfied with the status quo or alternatively they may see it as I do, that the Committee members are fine and they thank you for asking. People, Ideas & Objects offer to conduct these developments has not been accepted as submitted. We will therefore await the opportunity to entertain an offer in some form in the future. 

We noted the shale wealth endowed in North America had been diverted to satisfy the officers and directors personal financial compensation and desires. Today there is not much value left in the industry and it is reasonable to call what the state of affairs are. Being an inability to deal with the future, its opportunities and most particularly its issues. People point out that there are still the reserves, which is the case. However, the officers and directors have no plan, no understanding and no ability to produce them profitably and therefore what value are they? And furthermore where will the money come from to produce them? The most difficult issue is the societal issue that shows these officers and directors have placed the consumption of energy, by the most powerful economy ever known to man, into serious jeopardy. This winter we’ll see difficulties in Europe however North America will not face any deliverability or storage issues. The difficulties for North America are the time that’ll be needed to turn things around from where we are today. If we assume that oil & gas exploration and development is a seven year process from concept to production. What condition is that process in today?

In the service industry and subsequent tiers of industries involved in providing and supporting the oil & gas producers. What is represented in oil & gas today is inaction through their systemic “muddle through” culture. And the officers and directors are obviously hanging their hat on the continuation of this “tried and true” policy. The difficulty is that the industry and the various sub-tiers are in an advanced state of disarray and have proven they’re capacities and capabilities are severely deprecated. As with the producers' own investors and bankers, the operators within these subsequent tiers of industries do not trust, believe or have any faith in the current producer officers and directors. Everyone feels they’ve been played for fools and betrayed for decades by them. Eventually the service industry and others were left to deal with their own shareholders and bankers as if they were involved in completely unrelated businesses when producers ran the oil price to negative $40. Producers slashed field activity to save their cash on top of years of reducing demand, which proved to be too much for the service industries organizations to survive. Being forced to layoff their staff and cut up their equipment to pay for the rent and lights. To find the equipment and the people today won’t happen when their bankers and investors saw the equipment they financed dealt with in that manner. The attitude in the service industry is the producers broke it, they can fix it, why would they volunteer to pay for their equipment twice? And they see no acceptance of that responsibility.

Coincidentally what officers and directors did in their producer organizations when their investors ceased funding their unending ask for more capital. They began suspending those operations involved in the first year of that seven year process. Those people and talents may be lost just as the field personnel and talents have been lost. That was during 2015, in 2016 they did the same for the second year of the seven year process. Fast forward to 2022 what’s contained in work-in-progress? 

Initiative, entrepreneurship, innovation and action to deal with the industry issues is seen as just more of the same old “muddle through.” No one is going to do anything about it as the producer officers and directors only explore greater and more elaborate forms of innovative, executive compensation. For example, one might look at People, Ideas & Objects and our decades long pursuit of zero revenues. All in an attempt to enhance producer profitability. Oil & gas producers are leaderless. Who will be the next to step up in this environment?

To suggest that we had an opportunity to raise our budget at any time takes the better part of all my enthusiasm and optimism. It's a difficult situation we’re in and I’m more aware of that than anyone. At the same time I’m not confused about the situation in oil & gas. As to if or when the North American producers will be able to get a handle on their difficulties. There’s no acceptance there is an issue and they refuse to accept that action is required. We’re in an interesting period that has enabled them to be more obstinate than at most other times. Times are somewhat better than the past decade, and times like these have certainly appeared over the past, what I would estimate six of the last thirty six years. They’ll suggest that this time is different and I would agree with them. The scope and scale of production and deliverability in North America is far greater and will therefore be more difficult to maintain, the devastation in all of the associated industries and lastly, the future deliverability due to shale’s steep decline curves as we move closer to extinguishing the work-in-progress inventory provide for what I assume to be an interesting future. I am unaware of the plan or even if there is one.

The consequences of the producers' officers and directors (in)actions will now fall where they may. We don’t know where the industry’s headed. They don’t appear to me to have a plan as their prior plan to move to clean energy has failed spectacularly. Giving up on oil & gas two years ago may now have sealed their fate as they don’t have a viable vision of how to make the industry profitable. I’m suggesting these issues will now be determined in the next few months for them, since they have no capacity to do so on their own. 

My standard warning is restated here that my Intellectual Property surrounding the Preliminary Specification and elsewhere is not to be used in any manner by producer firms. They are not authorized and will not be authorized to do so. They chose not to and will need to live with the consequences of their decisions. Other software firms revenues are dependent on their Intellectual Property and are not going to violate other firms IP, if it only diminishes their value in the long run. We’ve only ever seen a stand still, “muddle through” approach by the North American producers. We expect that to continue with little upside for anyone else outside the producers, officers and directors. Stated simply, an industry where bureaucrats have achieved their definition of nirvana. 

OCI Revised Organizational Constructs, Part II

 The Joint Operating Committee

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

OCI Revised Organizational Constructs, Part I

 People, Ideas & Objects Preliminary Specification contains seven Organizational Constructs that are identified, supported and in a constructive manner, constrained by them. Incorporating these within ERP software allows users of our Cloud Administration & Accounting for Oil & Gas software and services to impute an understanding of the behavior and expectations of what is required by the producers and industry. Providing people within the industry with an understanding of “what, how and why” they’ll be able to use People, Ideas & Objects, our user community and their service providers to build value throughout the industry. In a decentralized environment, deferral of the operation away from the bureaucracy should not imply a loss of control. ERP software, and to a greater extent the Internet, become the means in which organizations are able to operate and achieve organizational performance trajectories that are superior to today’s. Our seven Organizational Constructs can be seen as both the enablers of that performance and the means in which to maintain the necessary control. 

People, Ideas & Objects identified the lack of real profitability in the producers was to be felt across the industry but also with everyone involved across the greater oil & gas economy. Profitability is the largest source of financial support that an industry has access to. This is now well understood and appreciated throughout the greater oil & gas economy. The efforts of everyone whether that be time, energy or money have been wasted by the self interests of producer officers and directors. The capitalists focus on profits being earned by investors is therefore appropriate in any and all cases. When investors are satisfied, they are there to provide prosperity for all those associated within a profitable industry in the short and medium terms, and for the future. When they’re not satisfied, they are quickly able to leave, sending the ultimate message of disapproval of the activities being carried out. It is our belief that investors, as were others, were duped for several decades by specious accounting that did and continues to misrepresent the performance in the producer firms. Accounting and reporting that aggravated and hid the abysmal performance of the industry for a protracted period of time. Leading to the comprehensive exhaustion of value from the industry. What is represented today in the financial statements of the producers would not be something to be proud of. Producers' financial statements reflect they are in serious medium to long term financial jeopardy. And none of today's financial statements are representative, they are as specious as they’ve ever been. Built on the promises of “building balance sheets'' and the ridiculous notion of “putting cash in the ground.” 

People, Ideas & Objects have been able to document the fact that chronic overproduction has been the source of a lack of real profitability throughout North American oil & gas since at least the July 1986 oil price collapse. Secondly, we noted that the Preliminary Specification published in August 2012, addresses overproduction specifically with a direct ERP software and services solution to this issue which generates profitability everywhere and always. Overproduction has been the systemic cause of the financial destruction in the industry for all but 6 of the past 36 years. Which dramatically contrasts the healthy compensation of the officers and directors over this same 36 year period. People, Ideas & Objects have also stated, repeatedly since May 2004, that software defines and supports organizations. Therefore any organizational change will have to be made in the ERP software first or the organization will regress to that which is defined in the current software that's used. The producers have used this knowledge to secure their franchise by not sponsoring any ERP software developments in the industry. Leaving them uncontested in their method and means of “governance.” Today we know that given the ultimatum of committing to the development of the Preliminary Specification, and therefore establishing an overall method of increased dynamism, innovativeness, accountability and profitability everywhere and always in North America. Producer officers and directors on August 31, 2021 chose to ignore the opportunity and stay the course. 

It can go by any number of different descriptions. “Cut and run,” “bail” or “cut your losses.” The one consistency in all of these is the fact they define failure. Shale oil & gas has now been deemed a failure by the producer officers and directors. They’re getting out, selling properties and writing down those shale assets that alleged such promise in all of those investment offerings. It’s on to the real thing now with clean energy and they’re making the transition with the oil & gas revenues established by prior investors in an irresponsible and unauthorized fashion. Revenues that need to be used to rebuild the industry and prepare for what is unquestionably the most difficult future oil & gas has ever faced. 

Our white paper published on July 4, 2019 entitled “Profitable, North American Energy Independence -- Through the Commercialization of Shale” suggests a means and method in which the industry could turn shale profitable. Upon review the producers refused to consider the initiative. It is far easier to excuse this or that, blame others and create viable scapegoats as to why others have failed them then it is to act. Only nine months after our White Papers publication their chronic overproduction dropped the oil price to almost negative $40 and refiners forced them to shut-in production. An argument they made against the Preliminary Specification that shutting in production would damage the formation. An argument that has now been proven to be false with no formation damage realized anywhere. Within two years of our paper's publication; was it acceptable to declare that shale would never be commercial and to just walk away from the catastrophe they had created, to then venture off into the clean energy industry that has proven never to be profitable? A place where accountability and performance are secondary to saving the planet, or what could best be described as bureaucratic nirvana. Or do they have a plan to make clean energy profitable? 

Why was it acceptable that officers and directors felt they could saunter off and forget about the serial failures they’ve created? Especially when there was a plan in place to make shale commercial. Who should hold them responsible and accountable? It should be the boards of directors. This behavior is unacceptable and reflects their history of walking away from all of their failures, not recognizing the need for profitability or understanding what is required to earn it. Oil & gas revenues will be needed to rebuild the industry from the damages that have been caused by these inactions. They’ll also be necessary to fund the future demands of the industry, not some far off unknown that producers have no basis of understanding about, capability, capacity or competitive advantage. Oil & gas’ diversion of revenues to clean energy is a fraud.

Summary of our Seven Constructs

We begin with a summary of the seven primary organizational structures in the Preliminary Specification that support the dynamic, innovative, accountable and profitable oil & gas producers and industry. These define the “what, how and why” of the Preliminary Specification from the highest level of its architecture. But most of all adopts a serious approach to the business focused on profitability everywhere and always. What would commonly be considered the behavior and culture of a successful business. 

The first Organizational Construct is the use of the Joint Operating Committee. Tying into the industry culture of the Joint Operating Committee and its seven frameworks enables an alignment between all aspects of the oil & gas exploration and production process. Creating a dynamic, innovative, accountable and profitable oil & gas producer and industry when the hierarchies compliance and governance frameworks are moved into alignment with the Joint Operating Committees legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks. The results are an organizational speed, innovativeness, accountability and profitability over today's base case. 

Our second organizational construct is the implementation of Professor Paul Romer’s “New Growth Theory” around the implementation of “non-rival” goods. Oil & gas can generate real value through implementation of sharing and shareable infrastructure such as cloud computing provides and People, Ideas & Objects are doing by implementing Cloud Administration & Accounting for Oil & Gas. Professor Romer’s theories are integral to our organization and we have captured this in our name which is representative and derivative of his theory.

A variable cost industry based administrative and accounting capacity and capability replaces the individual producer based capabilities whose infrastructures are individually replicated throughout each of the producer firms on an unshared and unshareable basis. Therefore substantially reducing the individual producers and overall costs of North American oil & gas exploration and production overhead.

Specialization and the division of labor make up the third organizational construct recognized in the Preliminary Specification. In terms of generating value, these were the only means western economies have been able to build value for the past 246 years. Turning the administrative and accounting capabilities and capacities into industry based variable costs, variable based on profitable production, which will enable these non competitive attributes of the producers to achieve three critical features over today’s business model.

The reorganization of the producers accounting and administrative resources into our user communities service provider organizations turns all of the producers costs variable based on profitable production. Which brings about the ability for producers to shut-in unprofitable properties and therefore maximize their corporate profitability.

Variable overhead costs are covered by profitable production or never incurred. Overhead costs are therefore recovered in the current period and a “cash float” is created to pay these ongoing costs. (Today’s capitalization of overhead does not replenish the cash incurred for the current overhead costs for decades. And, hence the need for the past chronic and annual demands on investors for more investment capital.)

The structure of People, Ideas & Objects software development capabilities, our user community and their service provider organizations provide producers with an iterative and incremental means to improve specialization and the division of labor consistently over the long term. Providing greater industry throughput from the same resource base. 

Intellectual Property is the fourth Organizational Construct of the Preliminary Specification. It provides a legal framework that exists in North America that enables the rapid and effective development of the science and technology basis of the oil & gas industry. The brilliance of this American system is the root cause of their economic dominance. Using Intellectual Property which is part of the U.S. Constitution, seeks to educate, inform, allow others to stand on the shoulders of giants, to protect entrepreneurs and innovators work while they do the difficult tasks of developing the much needed solutions to the difficult issues industry face today. Another distinct benefit is it dramatically reduces the unnecessary costs of innovation by eliminating the “me too” and repeated organizational mistakes that are made when innovation is disorganized and unfocused. 

The reason People, Ideas & Objects et al needs to be concerned about the startup to junior sector as much as any other classification is purely for the fact the industry’s rebuilding will be done on an innovative basis. Innovation is the basis of the Preliminary Specification. It enables People, Ideas & Objects, our user community and their service providers to achieve our two opposing objectives of providing oil & gas producers with the most profitable means of oil & gas production everywhere and always, and providing consumers with the lowest possible cost of an abundant energy supply. We do this with our decentralized production models price maker strategy that ensures all production is produced profitably. Including Exxon’s, Shell’s and that startup oil & gas firm that began this morning. And to do so innovatively to ensure that the ever escalating costs of oil & gas remain affordable to consumers and the commodities production profile and reserves continue to expand by achieving profitable, North American energy independence, everywhere and always.

The sixth Organizational Construct that we’re incorporating into the Preliminary Specification is markets with the three specific markets that are dominant in the oil & gas industry. These are the Petroleum Lease, Financial and Resource Marketplace modules. Each seeks to provide a virtual representation of the market that exists in the industry with the facilities of a fully enabled ERP system supporting the activities and actions of the producer firm and Joint Operating Committee. When we’re moving from a centralized to a decentralized method of organization through enhanced use of the Internet. The dependence of the firm shifts from its internal use to a much greater use of markets. To enable these market facilities within the Preliminary Specification is a capability that enhance the producer firm, Joint Operating Committees and industry. 

The last Organizational construct of course is the Information Technologies themselves. People, Ideas & Objects are not offering the latest version of a new wizbang technology. We are focused on the business value of the oil & gas industry. And enabling that through the now mature technologies that have developed in the IT market space. The value we generate from IT is substantial and is noted here as a full Organizational Construct not only as a stand alone benefit but also as an enabler of the other six Organizational Constructs. 

The specific value from the IT Organizational Construct that we’ll bring about is expanding the Cloud Computing paradigm. Bringing about an administrative and accounting capacity and capability through our Cloud Administration & Accounting for Oil & Gas software and service. This eliminates the producer's high capital cost in terms of establishing the capability, with substantial technical difficulty and brings these down to a low variable cost incurred only when profitable production occurs. Extending the shared and shareable cost model throughout oil & gas administration and accounting. 

From our point of view these are the approaches that we need to take to begin dealing with the serious nature of the difficulties in oil & gas. This is the approach that will yield the lower cost and higher quality innovative and profitable producers everywhere and always that we’re seeking. Setting a foundation for continuous iterative performance improvement. 

OCI Revised Service Provider, Part II

 Oracle CloudWorld 2022 Conference

People, Ideas & Objects, our user community and their service provider organizations are focused on the North American oil & gas producer marketplace. It is here that we have developed significant value through disintermediation and the introduction of innovative business models. Covering off the scope of what the unique aspects of the oil & gas producers processes demand in North America. We have relied upon Oracle Cloud ERP to provide the solid foundation of tier 1 ERP which provides the generic business process management. What our service providers are implementing is a microservices architecture which we won’t define here other than to say it is consistent with Oracle's overall product offerings. During 2022s Oracle CloudWorld conference it became clear that similar perspectives regarding the introduction of service providers has been undertaken by Oracle and are now being applied to their generic business processes. Just as People, Ideas & Objects have a number of interfaces in the Preliminary Specification entitled “Gap Filling.” Oracle is now filling gaps within their generic business processes with a variety of service providers offering services with Oracle’s software. This creates significant value for the dynamic, innovative, accountable and profitable oil & gas producers from these generic business processes. 

One example used in the Oracle CloudWorld 2022 conference was the agreement between Oracle and J.P. Morgan Chase. Where the bank's credit card can be used in conjunction with Oracle Cloud ERP to process the business related charges of the employees on the basis of policies that determine if the cost incurred is eligible for reimbursement or not. If eligible, Oracle processes the employees expense report based on the eligible charges for the month, file it based on the policies of the company and reimburse the employee or pay the credit card, and post the costs to the general ledger. Taking milliseconds to file the company wide expense reports and reduce the time and costs of thousands of man hours of filing, approving, recording and paying these for each employee, for even the smallest of firms. These types of service providers are now being actively developed by Oracle and will enhance the dynamic, innovative, accountable and profitable oil & gas producer on these generic business processes in the same way that People, Ideas & Objects our user community and most particularly their service provider organizations have been designed to do for the oil & gas processes. 

An important clarification of the distribution of the oil & gas service providers is that we’re providing software and services to all of the oil & gas production produced in North America. Whether that is from Exxon or a startup it will not concern us. Just as it would not concern either Oracle or J.P. Morgan Chase as to the size of the firm using their credit card or the ERP software Oracle provides. 

Gap filling is the means in which specialization and the division of labor is undertaken. When a gap between two market offerings is seen, an entrepreneur can provide a product or service to fill that gap which expands productivity in society. In today’s advanced society we are constrained by softwares capabilities and the ability to fill gaps is the appropriate role that our user community, their service provider organizations and our software developers need to fill. One of the inherent benefits of this codification of oil & gas and Oracle’s generic business process management within Oracle Cloud ERP is that these processes become standardized and objective. A deviation from the firm's policies regarding expense report eligibility is clearly understood by the employee and the engagement of any unauthorized costs will be undertaken by the employee based on that knowledge. On a larger scale People, Ideas & Objects, our user communities service providers will be undertaking the full scope of accounting of the oil & gas producers properties. Whereas when the property is determined through the actual, factual accounting data that it is incurring a loss; the producers owning that property will know that property was assessed on the same standard and objective basis that all other properties were in North America. They will therefore be able to decide to shut-in that property with the clear understanding that they’ll be enhancing their corporate profits by not diluting them from that specific property losses, in addition to the many other benefits we’ve noted in the Preliminary Specification.

Another attribute discussed at the conference that has a distinct benefit to the oil & gas industry is the larger Oracle community that exists and is building through these initiatives. Oracle Cloud ERP is one of what are considered three tier 1 ERP solutions and is considered the premier system in many evaluations. Sales of their product these past few years have accelerated and the installed base of users and service providers that exist in that marketplace will be a net benefit to the oil & gas producers and all those that are associated with People, Ideas & Objects. We are not reinventing the wheel, we are applying the appropriate tools that have been tried and tested across other industries and throughout the globe that have built value. We are becoming part of a much larger user community and service provider population. I see substantial value in this for the dynamic, innovative, accountable and profitable oil & gas producers. Safra Catz the CEO of Oracle was quoted as saying.

• Bold is the winning strategy.
• Moving slowly is dangerous.
• Innovation is scary but not risky.
• Oracle is focused on their customer.
• Culture and performance move together. 

Sentiments that are consistent with our user community. 

People, Ideas & Objects, our user community and their service providers are employing what is now commonly referred to as a Software as a Service (SaaS) style of offering to the North American oil & gas industry in this Cloud Administration & Accounting for Oil & Gas and the implications of that are broad. The following are the areas of concern that fall under the SaaS model of delivery. And give a brief overview of how the specific user community and their service provider organizations will be involved in the development of the Preliminary Specification and then how it is they’ll support the industries producers within this model. Starting from the bottom and working to the top we’ll break down these services. The following diagram shows from a systems and services perspective what this consists of and who will address these areas of concern. These areas are what were traditionally considered the Information Technology domain. What People, Ideas & Objects consider to fall under the administrative role in the administration and accounting of our user community and their service provider organizations. From the book “IaaS for Dummies” page 8, John Wiley and Sons.

Data Center, Networking, Storage and Servers

These form part of the Oracle Cloud ERP offering and are supported by their regions located around the world. We have discussed briefly the method that we’ll be incorporating the Preliminary Specification within the Oracle Cloud ERP offering and will state at this point we are implementing Oracle’s recommended method. We are writing our Java application within the Oracle Fusion code itself through the Oracle Fusion Middleware Server. It will not be a series of separate modules that sit on top of Oracle Cloud ERP which has been the traditional approach. It is in this way that either People, Ideas & Objects or Oracle may update their respective code bases on their currently scheduled quarterly release without impacting one anothers code. Using the full value of Java’s inheritance, polymorphism and most specifically encapsulation. 

These four base elements of a SaaS are determined at definition by the user of the Oracle Cloud ERP offering. Selecting the data center, processor, storage type and all other manner of configurations are available. People, Ideas & Objects are employing a microservices architecture that will map the service provider's single administrative or accounting process to the domain of concern to one specific microservice. In the employment of specialization and division of labor we do not expect the service provider to be conducting the accounting involved in an individual process to also be involved in the IT related SaaS roles and responsibilities. These are mutually exclusive capacities and capabilities. There will be other members of our user community with their own service provider organizations that manage elements of the SaaS offering on behalf of the population of other service providers.

Hyperspecialization demands that these types of service providers be created to support the community of service providers in IT and other areas of specialized needs. What is also demanded in this overall community are service providers that will take on a role of coordinating the output of other service providers and conducting additional services upon these efforts. Consider how the month-long process, level of detail and broad scope of the Material Balance Report would need to come together. 

Virtualization

Within the Oracle Cloud ERP offering there is a registry service for the various images that we will have developed and published and those that Oracle have published. These will be deployed as needed by the service provider that may be configured for managing or deploying the “month-end” processes, etc. Virtualization is a way of life in the cloud and it is evolving at a remarkable pace with the future configuration and architectures of systems being derivative of these technologies in some form or another. The core of Oracle Cloud ERP, including the modules of the Preliminary Specification, will be run on centralized servers in a more traditional sense where these microservices will access their data and defer their heavy processing to. 

Operating System, Middleware, Runtime, Data and Applications

This software stack will have a myriad of configurations contained within the virtualization registry. Whatever the process needs to operate will remain in the image and the remainder of the operating system, database and others are removed to have a lightweight configuration for the sole purpose of conducting that one process. There will also be the main configuration where Oracle Cloud ERP and People, Ideas & Objects Preliminary Specifications core applications will be operational at all times. Service providers will deploy virtualized images of what they need when they’re needed. Oracle has taken their Linux operating system and most importantly their Database in the automated direction with machine learning technologies. By reviewing the logs of the system it can make changes to the configuration and tune the database as needed without the need for human intervention. The work of our user communities service providers that are administrators of the database will no longer need to concern themselves with table size growth as the automated database will drop tables when required, etc. It is here where our service providers and their ownership by the user community will be able to make the significant impact that the Preliminary Specification provides. The motivation behind the user community is that they’re business people who are building their own business based on serving the producer population with the objective of ensuring the most profitable means of oil and gas operations. They’ll have the motivation, the tools by way of access to the Preliminary Specifications Intellectual Property and our developers, but also exclusive access and attention of the producer firms in order to determine what is the best method to meet their objective of real profitability everywhere and always and how to rebuild their business in this vision. 

OCI Revised Service Provider, Part I

 Members of People, Ideas & Objects user community are licensed for a variety of rights and privileges in the development, implementation and operation of the Preliminary Specification. One of these includes the exclusive right to own and operate a service provider that will manage an individual process within the Preliminary Specifications software and deliver that to the oil & gas producers along with the services they will offer. The scope of the service providers, as a sub-industry, includes the administration and accounting domain of the North American oil & gas producers. Delivery of People, Ideas & Objects software with their services to the producers, combined with the role of their user community member leading the service provider, who has exclusive access to our software developers, gives these service providers an environment where they would be able to innovate and iteratively change their managed processes software and services to meet the producers changing conditions. 

Cloud Administration & Accounting for Oil & Gas is the sub-industry that we’re providing in this change. Taking the concept of Cloud Computing and applying it to these processes is appropriate as the same issues, opportunities, cost reductions and efficiency exist and are available through this reorganization. First the service providers are the key change in making all of the producers' costs variable, based on profitable production. Enabling them to shut-in any unprofitable production and ensuring that the industry remains profitable everywhere and always. Service providers are therefore the means to generate the critical elements of the Preliminary Specifications value proposition. Reducing the producer's individual overhead costs incurred. When each producer is tasked with building, maintaining and operating the exact same, non-competitive attributes of administrative and accounting capacity and capabilities, on an unshared and unshareable basis we have the secondary reason for a chronic lack of profitability in the industry. Specialization and the division of labor are able to more effectively deal with the complexity of these environments when they are also done on this shared basis. Our dual approach to the resolution of this loss of profitability will ensure that consumers are provided with the lowest possible costs available and continue to be provided with abundant, reliable energy. 

An operational service provider will be responsible for the management of an individual process on behalf of the North American oil & gas industry. The dimension of the work would be breathtaking in terms of understanding the scope and scale of the work that is undertaken each month. Without getting into the details of a specific process, and speaking only of the generalities, I want to discuss the scope and scale, and the details of the “what,” “how” and “why” of a service provider in the People, Ideas & Objects Preliminary Specification. 

Having as the process domain, the entire North American producer population to manage would be a difficult and challenging task to grasp initially. The approach to the process would be fundamentally different from that which is currently done in a junior oil & gas company or ExxonMobil. Even they don’t come close to that scale of the proposed volume of transactions of a service provider. Therefore the need to design the process within our user community from the basis of a new method of organization will have already been determined as a result of the service providers owners early participation in the People, Ideas & Objects user community. Our user communities research will have determined the level of specialization and division of labor for the people that need to be involved in each process and the tasks that will need to be done. Both individually and from a global perspective in terms of application functionality. Defining what the computers and what the people can each do best. As we've noted here many times before, computers are good at storing data and processing information. People are good at making decisions, collaborating, innovation, ideas, planning, creativity, design, leadership and problem solving to name only a few. This new specialization and division of labor between computers and people will be the base that a service provider will use in this new oil & gas environment. It will be one of the things that is used to enhance the service to ensure that the oil & gas producers continue to achieve the most profitable means of oil & gas operations. A new specialization and division of labor that will provide better services and lower costs to the producers and reveal new ways in which to do business that can add value to their organizations. 

Participation in our user community will continue for the service provider principals as a result of People, Ideas & Objects establishing the software development and user community as permanent capabilities in the North American oil & gas industry. The need to make changes in the defined specialization and division of labor must be initiated in the software first and foremost. Society in general is now defined and supported, and constrained by the software systems that we use, particularly ERP software. Any change that we make in our organizations must first be made in the software. As the principal members of the service provider sub-industry our user community will continue to ensure there is the ability to affect the changes necessary through the People, Ideas & Objects software development capability and our user communities commitment and vision. This feedback from the service providers is one of the primary reasons that there will be constant development work being done on the systems and services provided by this sub-industry. All to the benefit of the oil & gas producers enhanced profitability based on the user communities charter. 

In terms of how People, Ideas & Objects will determine the allocation of specific service provider licenses to which member of the user community. The user community members' contributions that are made during the development process will be the determining factor. No one is going to go through all the submissions and be able to allocate the appropriate license to the right individual. That would be a superhuman exercise and not possible. It is however well within the scope of what Artificial Intelligence is able to determine. The AI algorithm might review the Final Specification and determine the key attributes and the contributions made to the system and by whom. It might then be able to go back and determine the first mention of these key contributions and the individual who originated it. It might then review the sum of all of the users contributions, compare those with the other users and their areas of specific idea generation. Then apply the known processes under management within the Final Specification and award the licenses for the management of those processes to the highest and most valuable contributor of each individual process in terms of the ideas and contributions that were made. It sounds easy when I put it like this, however, we will have a budget set aside for the development of this algorithm the moment People, Ideas & Objects are funded. That way by the time we have to apply the AI to the situation it will be tested and the bugs worked out. The user community license provides each user community member with the exclusive right to manage the domain of a process as a service provider. There may be multiple owners of a service provider and user community members with interests in multiple service providers. These AI recommendations and the algorithms development will fall within the domain of our user communities responsibility.

It is on the basis of changing the relationship of how the producer accesses their administrative and accounting capabilities that we are able to enhance the profitability of North American producers. This will be done through the Preliminary Specifications decentralized production model. This model provides the capability of producers to implement a “price maker” strategy that will be a key competitive capability in this shale based era. This is enabled by the producer shutting in any unprofitable production. Reducing the amount of the commodity on the marketplace and therefore ensuring the commodity is valued at its marginal price. At the same time, during a period that any production is shut-in, the reserves are held for a time when they can be produced profitably. The producer will not incur any production or storage costs as the reserves provide a much lower cost alternative for them. The property records a null operation as there are no revenues, royalties, operating costs or overhead costs. The producer records the highest possible level of corporate profitability when unprofitable properties no longer dilute the profits of their profitable properties. The lack of overhead costs being incurred on shut-in production is a feature of dealing with the administrative and accounting capabilities through these service providers on an industry wide basis. When the property is shut-in a service provider will receive no data or information from the People, Ideas & Objects task and transfer network in the Preliminary Specification that will otherwise cause them to incur any administrative or accounting task or generate a billing to that Joint Operating Committee for their services that month, as no services were rendered. 

The task and transfer network is a part of the Preliminary Specification that will be developed in a variety of different modules. It provides the high level automation that is necessary for the service providers to efficiently process the oil & gas producers operations. The task and transfer network provides for the automation of the processes and a key toolset of the service provider. Just as specialization, the division of labor, standardization, objectivity and cloud computing are key toolsets of the service providers in establishing and providing their Cloud Administration & Accounting service for Oil & Gas. It is the application of these tools, and others, that are the focus of the service providers in providing the oil & gas producers with the most profitable means of oil & gas operations. It is the service provider that resides at the point of discovery and conflict of the producer's administrative and accounting operations. It is there that they can improve and enhance the process through this substantial toolset that they have at their disposal. Key within that toolset is the People, Ideas & Objects software development capability and the service providers direct participation as a user community member. And it is in that way they can affect real change to ensure that their producer clients are provided with the most profitable means of oil & gas operations. Automation will be invoked at high levels 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 from the point of view of the reduction of the costs itself. 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 this 21st century economy.

Producer officers and directors are well versed in developing viable scapegoats to justify not implementing the Preliminary Specification. Their most successful argument has been the price maker strategy is collusion. What has been standard business practice in all other industries since the time of the great depression is deemed to be collusion. The results of each property's operations for the month are presented to the producer in a complete set of actual, factual financial statements. This is enabled through the fact that service providers will be charging their costs of administration and accounting directly to the Joint Operating Committee. Monthly allocations for depletion on the basis that oil & gas needs to begin competing in today's capital markets. Determining which properties are profitable and shutting in any unprofitable ones. And begin to account for passing the profitable productions capital costs on to consumers. Why would anyone in any industry continue to produce any asset unprofitably? To refute the claims made in the Preliminary Specification producers have come up with many excuses and reasons why they can’t, won’t and will not ever proceed with the development, implementation and reorganization of the North American oil & gas industry on the basis of profitability everywhere and always. The destruction they’ve authored is now permanent and in 2022 we began to see that the rest of the global industry is active whereas North American producers seem to have been forgotten. However, North American based producers only wished their actions could be forgotten. It’s not that they’re being forgotten, it's that everyone remembers what they’ve done.

I raise this point as many of their arguments on the details regarding the Preliminary Specification could be valid, if we were not to consider them. These arguments are however specious on their face and in theory could potentially provide them with an endless supply of reasons not to do anything, which seems to form part of their overall “do nothing” business model. The Preliminary Specification is derivative of the research I conducted and the experience that I’ve gained in working in oil & gas. No one individual in the world has the wherewithal to make a pencil. The same I would assume is the case in oil & gas. That is why we are user community based, and our user community members are the principals behind each of the service providers. The same pencil analogy applies to each of the individual user community members, however collectively we aim to cover off the full spectrum of producers administration and accounting needs with the assistance of producers input. We’re offering the solution to the problem we’ve identified as a lack of a dynamic, innovative, accountable and profitable North American oil & gas industry. When producers fund People, Ideas & Objects they’ll have the appropriate motivation to participate by having put some skin in the game. And therefore prove to their shareholders and bankers that profitability is important to the industry. Then ensure that the efforts they make are what are needed to resolve oil & gas exploration & production related issues and opportunities. We are developing the Preliminary Specification, not a remake of the failure that we see today. Therefore it’s necessary for producers to bring us their issues, not their solutions. 

We’ve seen this behavior throughout the producer population these past four decades in how they’ve worked with the service industry. Sitting high atop the industry on Caesar's throne and issuing their decrees to those with a simple thumbs up or down gesture. However when people are bringing solutions to the problems that they see in producers business it might be a better approach to show them the respect they deserve and see what it is they have. Share the producer's concerns and work together to have them solved. In an innovative industry the final solution is rarely found on the first iteration. It demands work, and most of all the hard work of solving problems that others are doing and bringing to producers about the issues and opportunities they see in the producers business. To continually cast them aside with a thumbs down is the kind of treatment that will eventually be shared with the producers in times such as 2022 when the industry is profitable, possibly, and they’re being offered nothing. Much in the same way that investors today only believe in producers' dividend checks. This will demand efforts and financial commitments by producers and it's here that the belief in the status quo is proven to be unjustified. 

To call the service providers a sub-industry of the oil & gas industry is appropriate based on their scope and scale. Replacing the industries administrative and accounting capabilities which are housed within each individual producer involves many individuals. And in terms of costs it is estimated that the producers incur over $10 billion in G&A costs across North America that would be reallocated as revenues to the service providers. A significant change in the way in which the oil & gas industry is operated. Incremental value is generated based on the ability of the service providers to exercise real economic growth through the toolset of specialization and the division of labor. Providing enhanced performance throughput from the same $10+ billion in G&A costs. And unquantifiable savings as a result of building and sharing the costs of one non-competitive attribute of the industry based, variable cost, administrative and accounting capability and capacity instead of each producer involved in providing their own unshared and unshareable capability in-house.

Arguments against this change are self-serving in nature. Suggesting People, Ideas & Objects software and services scope and scale is too broad yet the scope is well within their internal domain of what they can provide. Through the compliance requirements of the various government agencies, the sophistication of society that we find ourselves in and the needs of the oil & gas producers partners. The redundant, unshared and unshareable building of administrative and accounting requirements of an oil & gas producer are the secondary cause of the lack of real profitability in the oil & gas industry. Long ago these demands were instrumental in eliminating the startup and small oil & gas producers from commercial operations. The road to success for producers was their capacity to raise capital, not their geological or engineering capabilities. We’re not far from the point where these demands on all producers are exceeding the expectation of what overhead costs are reasonable. The high throughput production model, the business model industry is structured under, demands the producer to produce at capacity at all times in order to cover their fixed overheads. Production at capacity is leading to the many commodity price collapses we’ve seen since the first oil price collapse in July 1986 and are creating systemic losses that will lead to the demise of the industry at some point in the very near future. If overhead is not a material issue, why do they continue to destroy the commodity prices just to cover them off?

It is the lighter weight of the producer organizations under the Preliminary Specification that enables the desired characteristics of being dynamic, innovative, accountable and profitable. Having the administrative and accounting provided by the service providers has left the C Suite executives, the engineering and earth science resources of the producer firm, the land, some legal and support staff. With this smaller footprint, no matter the size of the production profile, the producer firm is able to focus on their key competitive advantages of their land and asset base, and the coordination of the markets earth science and engineering capabilities. Having state of the art administrative and accounting service providers is what they’ll have on a variable service fee basis. Variable based on profitable production. Accessing this industry wide Cloud Administration & Accounting for Oil & Gas capability and freeing each individual producer from the onerous and costly tasks of building the unshared and unshareable administrative and accounting capabilities they've created in-house. 

This will enable the producers to be able to focus on their business of generating greater value for their shareholders. Why we need to focus on generating value and profitability for shareholders should be evident to everyone now that we've been witnessing the performance of the status quo establishment's interpretation of what is priority and the devastated North American oil & gas landscape that remains. 

This Cloud Administrative & Accounting for Oil & Gas capability will accommodate changes in the way in which producers do their work. Through user community participation and the People, Ideas & Objects software development capabilities the service provider can enable change in the software and processes to increase the productivity and throughput of the producer firm. Changes made within the oil & gas producer itself, and changes to enhance the producers key competitive capabilities. These can be handled by the service provider to ensure that they’re adopted within the processes that producers use. Enabling a further specialization and division of labor within the earth science and engineering disciplines. Something that is suggested here as necessary in order to address the shortfalls in these critical resources over the mid to long term. 

The world is a dangerous place to live not because of the people who are evil but because of the people who don’t do anything about it. 

- Albert Einstein 

The scope and scale of what it is that People, Ideas & Objects are undertaking here is comprehensive. That we would aspire to undertake this in the normal course would be unheard of. I don’t believe we’re in an environment where we’re anywhere near normal and what is accepted as normal today is unacceptable. There are serious consequences now as a result of what the producers have authored. Houston can barely make decisions as to which business they’re in. They were once the center of the global oil & gas industry, it’s difficult to suggest how they fit in today.

Time is now of the essence. Time is wasting and there are consequences of actions and inactions by good people that are having much greater implications than we’re realizing when they subsequently occur. As much as I belittle the status quo it’s obvious to everyone that inaction is in their DNA. We can't and should not expect anything from them. They’ll continue to deny People, Ideas & Objects the development resources necessary to proceed. However that is not a reason to sit and watch this tumble further downwards. There should be no doubt of the need to rebuild the industry in my opinion. It will be far easier to rebuild than trying to compromise and deal with today’s failed organizations and end up with something that will not work. 

I have defined the market for our user community and their service provider organizations to fall within the domain of the North American oil & gas administration and accounting roles and responsibilities. Our objective is to provide the dynamic, innovative, accountable and profitable oil & gas producers with the most profitable means of oil & gas operations, everywhere and always. The areas covered by the service providers include the operational, exploration, land, IT and traditional areas of administration of the producers. And of course the accounting and regulatory processes associated with these. This is a data rich environment and the need to have these captured in an ERP system are paramount. Today’s process of feeding multiple systems with the same data is due to the fact that these systems bridge different domains and conflict between the various empires of the producer which is one of the key impediments to the lack of integration in the current systems. These have been implied and well understood with regard to our user community.