The Issue, Part I

 Eighteen months ago officers and directors of the producer firms were stating their unilateral shift in the direction towards clean energy. Harmonizing on the talking point that “shale will never be commercial.” Europe has taught us that listening to teenagers' apocalyptic pronouncements about the seasonal changes in the weather, and divesting of oil & gas, is dangerous. With regards to the officers and directors of the producer firms you have to ask yourself a few questions about their actions in the directions they take. What should we think now of this seasonal change in the officers and directors vision of the future? What are these people motivated by? What do they think about when they get up in the morning? Is this what passes for innovation? What direction will the wind be blowing in a few months? What characteristic other than revenue does shale provide that has attracted these officers and directors. I don’t think any of these questions have answers that involve oil & gas or that imply the officers and directors are thinking logically now.

Producer officers and directors seem fundamentally incapable of grasping basic business concepts. Cultural inertia causes them to continue to assume that whatever they produce in terms of cash be used for either dividends, capital expenditures or reducing bank debt. It is inconceivable to them that they achieve “real” profitable operations and the generation of cash to satisfy all three of these, all of the time. They have at their disposal all the authority, responsibility, resources and albeit diminished capacity and capabilities to conduct themselves in a manner that would provide them with all of the resources they could ever imagine. If only all those other people would stop picking on them.

A Polish broadcast during WWII.

“All is lost that is not saved by active effort”

Winston S. Churchill

Triumph and Tragedy, 1953

Introduction

The issue that I am finding in early 2023 is the cultural regression that appears to be occurring in oil & gas producers. Any progress that may have been achieved in terms of the investors desire to change the methods of management of the officers and directors. Quickly regresses back to the cultural norms when a hint of normalcy appears on the horizon for them. The need to change becomes less of an issue when they believe “muddle through” has been proven effective once again.

The need to shift away from this mythical, magical world that oil & gas operates in today is a necessity. The inability to look out the window to see the scope and scale of the damage and destruction authored through this disastrous management is perplexing. 

They have no field level capacities or capability to maintain the level of production they’ve obtained for the mid to long term. Drilling rig investors had to watch their new drilling rigs cut up for scrap metal to feed the staff after they were financially destroyed by the producer officers and directors. Where is their motivation to do that again? 

Producers have cannibalized their own internal processes through the attrition diet of an ongoing, almost eight year withdrawal by their investors. Nonetheless the cupboards are bare with no work in progress and no internal capacity or capability to deal with what their production profile will demand of them in order for it to be sustained. 

Their capital structures are unsupported. What could be worse than the abandonment by your investors. Absolutely nothing, and should have prompted immediate remedial management actions to rectify what the investors' concerns are. That was in 2015. 

Shale has four distinct characteristics that demand a different approach than what the current producer's culture is capable of. It is costly, prolific in terms of the reserves discovered, initial production volumes are dramatic and their steep decline curve demands costly reworks in as little as 18 months to maintain production volumes. 

In this oil & gas culture where everything is capitalized and each petroleum reserve is allocated an equal share of the capital cost no matter when it will be produced, where many of those costs will not be recognized until decades later and after many costly reworks. What will be the dynamic at play in their current method of accounting and potential production declines? It’s quite easy to see that it will be “building bigger, even more beautiful balance sheets,” “putting more cash in the ground” and specious profitability for the long term. “Muddle through.”

Over Investment Leads to Overproduction

These material consequences of overproduction started in the natural gas marketplace in 2009. Shale gas reserves were being exposed to the marketplace and the decline in natural gas prices were precipitous. Price structures were eventually damaged in a comprehensive fashion where natural gas has since traded anywhere between 9.74 to 1 and 28.04 to 1 of oil prices as opposed to its traditional heating value equivalent of 6 to 1. Closing out 2022 at 18.2 to 1. How this was allowed to happen, what efforts have been taken to rectify the situation, and why has nothing been done for 14 years? The answer was during the early days, the oil side of the business was healthy enough to carry both sides of the business. Which was true, oil prices were high enough until December 2014. During 2010, the application of shale technologies moved from natural gas to oil. Causing the same overproduction to soon begin on that side of the business. Creating difficulties on both sides of the producer firm, an issue that had never happened before.

The technical economic classifications of price makers and price takers are as follows. From Investopedia.

What Is a Price Maker​?

A price maker is an entity, such as a firm, with a monopoly that gives it the power to influence the price it charges as the goods it produces does not have perfect substitutes. A price maker within monopolistic competition produces goods that are differentiated in some way from its competitors' products. The price maker is also a profit-maximizer because it will increase output only as long as its marginal revenue is greater than its marginal cost. In other words, as long as it is producing a profit.

What substitutes are there for oil and natural gas? Can hydro power lubricate your engine or power Elon Musk's rocket to Mars? Will nuclear power provide the chemicals that oil and gas can? What size jerry-can can you use to carry electricity from wind or solar? Clearly there are no substitutes to oil and natural gas. And although in the hands of the bureaucrats oil and gas has not been a profit maximizer, that does not mean that it can’t be, or shouldn’t be. 

The Preliminary Specifications decentralized production models price maker strategy enables producers to produce only profitable production, everywhere and always, by establishing profitability as the only fair and reasonable means of production allocation. Another characteristic of price makers is that small changes in production volumes lead to large changes in price. We’ve seen this with the actions of OPEC+ and the Alberta government’s implementation of mandatory production cuts. If oil and gas commodities aren’t price makers then they would be price takers as the producers assume. So what are the characteristics of a price taker? Again from Investopedia.

What Is a Price-Taker?

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

The comparison to the bottled water market is appropriate here. New producers would be offered the same price as established providers despite the supply, demand and inventory in the market. And the ability to charge a premium during shortages would not be possible as consumers would switch to drink tap water, juice, soft drinks etc. 

Investors are concerned that shale reservoirs have created a shift in the dynamics of the oil and gas producers. Asking if shale will ever become commercial under the current business model used by these producers? Noting “shale reserves are a rapidly depleting asset.” Which accurately captures the entire scope of the problem. They can now see the assets and profitability of the producers have been overreported. The cash that fueled the industry was never internally generated. And without investors supporting the producers with annual cash infusions, the industry is not viable. Even though their working capital balances are at critically low and negative levels producers refuse to listen to anything from outside their organizations.

● Markets provide only one thing, information in the form of price. If you can produce a profit at that price then produce. Producers have overproduced into the commodity markets for thirty out of the past thirty six years (2022), despite prices indicating otherwise.

● Refusal to listen to their investors is consistent with the treatment People, Ideas & Objects have experienced over the past number of years since we introduced the Preliminary Specification​ as our solution to the industry's difficulties. The one exception is their feigned belief in shifting to clean energy investments. A world where accountability will be measured on how effective they’re saving the planet. They appeared to listen to their investors and went into action the following morning.

There is a litany of excuses that were used to assuage investors' concerns. Excuses such as “waiting for a cold winter,” “markets to rebalance,” “capital discipline,” “reducing costs through innovations,” “we’re profitable,” “Artificial Intelligence and the cloud,” “capital discipline” again, to its “OPEC’s or the investors fault,” “have to ensure alternatives don’t become viable,” “natural gas is a by-product,” “it’s the pipeline companies fault,” the “governments fault” these last two somewhat exclusively in Canada. Isn't it ironic that these same officers and directors were claiming to ensure that oil & gas prices didn’t rise too high to allow alternatives to get a foothold. Now they are the ones, in unauthorized fashion, to be responsible for destroying the oil & gas industry and taking its revenues towards “clean energy.” Premier quality individuals! We also find that “market rebalancing” is a particularly vile excuse as it has no basis in fact, and is only the willful destruction of the industries production profile to meet demand. 

It is People, Ideas & Objects belief that through a fundamental accounting change that occurred in the late 1970s. When the SEC regulated producers to use Full Cost accounting and its associated ceiling test. A methodology determining what the capital assets recorded in property, plant and equipment should not exceed. This enabled producers to compare the value of their balance sheets property, plant and equipment account to equal, with some adjustments, the present value of their reserves as specified in the independent reserves report times the current commodity prices as the upper limit. If their balance sheet assets value exceeded their reserves “value” then they would be subject to the ceiling test write down to correct any asset overvaluation. 

The perspective in oil & gas of the ceiling test was that it became the target to be achieved by each and every producer each year, not the limit. As represented in the “build balance sheets” and “put cash in the ground” calling of the officers and directors. To suggest as People, Ideas & Objects do that the most competitive producer would seek to reduce property, plant and equipment account (competitively reducing their overall cost of production) as quickly as possible became heresy and was refuted with their typical obstinance and attacks upon us. 

What was quickly discovered in the high interest rate environment of the 1980s was that interest was a key attribute of the assets value and therefore interest expenses were and are capitalized. Someone then asked about overhead with the resulting policies in which today we see approximately 85% of all overhead, including the excessive, creative, executive compensation, in the industry capitalized to property, plant and equipment. Slowly the culture of the industry became a spending frenzy fuelled by what came to be each producer's annual share offering. Fueled by specious profits that included revenues less royalties, operations and a sliver of the capital costs associated with the years reserves production over the total reserves. When this formula is applied to the high cost, prolific and steep decline curve of shale; the overproduction and specious reporting became evident to all. 

This culture has grown over these past four decades to know no difference in terms of what and how the industry generates or destroys value. The belief that drilling wells releases oil and gas reserves which are tremendously valuable. Until People, Ideas & Objects began arguing that “real” financial profitability was necessary, the industry did not care whatsoever about profits, it was about cash flow, not profits, and we were bellitted for our belief in profits. We believe oil and gas reserves are of little to no value if they can’t be produced profitably and profitably considering an appropriate financial accounting of all of the exploration and production costs, including capital, in a capital intensive industry. Where the costs of the product passed to the consumer in a capital intensive industry will be predominantly capital in nature and competitive in the North American capital markets. 

As of the end of 2022 we estimate that the amount of capital costs recorded on the balance sheets of North American producers will be approximately $1.5 trillion. Largely comprised of the high cost shale drilling that has dominated the past decade. U.S. shale based natural gas volumes produced from the period January 1, 2000 to November 30, 2022 total 262 TCF. The proven natural gas reserves estimate as of January 1, 2022 is 625.4 TCF. Representing a remaining 23.43 years of natural gas production at the average production rate of the past three years. Are we half way through the period of time in which shale gas will be with us? That is highly doubtful and only representative of what is known today. The question I want to ask is what will we have left to represent those shale gas reserves at the end of the next 23.43 years. It would seem that the cumulative shale gas production of 262 TCF didn’t generate anything of value outside the creative, excessive, executive compensation of the officers and directors of the producer firms. Who else has prospered?

In terms of oil reserves we also know that no proven reserves exist at negative commodity prices. As with natural gas, shale oil has been prosperous for officers and directors and they have “muddled through” handsomely. As with People, Ideas & Objects focus on value, shale will take significant efforts to make something of the remaining reserves and to rebuild a viable industry. Something that is well beyond the efforts and imagination of the current administration as evidenced by their inability to act, recognize the issue, take responsibility, lack of focus, business understanding and tendency to walk off the stage to other industries. We’ve also learned over the past decades that we should listen better to what these people are telling us. When they say they’re “building balance sheets” and “putting cash in the ground” we should accept that and not expect otherwise. They were telling us exactly what it was they were doing. Just as today they’ve stated that “shale will never be commercial.” Therefore why try when they can make clean energy all that it can be! Has there ever been a better time for change?

OCI Revised Organization Constructs, Part IX

 Summary & Conclusion

Culture and performance move together.

Safra Catz, CEO Oracle

It is People, Ideas & Objects opinion and hypothesis that the extent of the damage and destruction that has occurred in oil & gas is extensive. The failed business model of being wholly dependent upon outside financing to “build balance sheets” was discovered to be what it is by the investors in 2015. As a result the subsequent cancellation of new money coming in has caused producers to stumble forward on the cash flow generated from the weak assets they’ve developed. Not having to have performed at any point in the past four decades allowed the industry to become unproductive and uncompetitive. Since 2015 nothing has changed other than a steep trajectory downwards as these producers believed it was only “a matter of time before investors would rush back in.” 

The question becomes not so much about the state of affairs of the industry but what will happen in the mid to long term. Do our expectations of what this industry will be able to do in the future meet reality? Profits are the only source of capital large enough to satisfy the broad scope of industry and producer demands. What we know and understand through the development of these Organization Constructs is that they form the culture of the greater oil & gas economy. And none of these apply to the current state of producer firms. Which is best represented by stating they don’t understand they’re not profitable, they don’t know how to be profitable and are not motivated to become profitable. 

To resolve the current difficulties that plague the North American oil & gas industry demands that we organize an approach to how it’ll be resolved. That is the work that People, Ideas & Objects, our user community and their service provider organizations propose to do with input from the new oil & gas, service and all the tertiary industries involved in the greater oil & gas economy. Software is what defines and supports the organization in today’s society. Serendipity, spontaneous order and creative destruction have been hamstrung by the fact that software constrains an organization in proverbial cement based on its current process management definition. To make any organizational or process change has to be orchestrated through the software first in order to have the change take effect. Otherwise the organization will quickly regress back to the software definition of the existing process. This is the result of our dependence on Information Technology and is what we’ve called a modern day software bug. One that has cost the oil & gas industry its prosperity as officers and directors took this knowledge, never changed their organizations ERP software and therefore sealed their method of management. 

We’ve attributed the industry's destruction to chronic overproduction of oil & gas, or as we describe it, unprofitable production and excessive overhead costs. Which have both occurred systemically throughout North America as far back as July 1986. All that was necessary to reverse these difficulties was to shut-in any unprofitable production. Businesses recognize that overreported assets beget equal and commensurate overreported profitability, attracting disproportionate volumes of investors who in turn create overinvestment leading to the inevitable overproduction and the continuation of unprofitable production. This was done through a number of accounting methods that we’ve documented throughout the history of these writings. This became apparent and obvious in the downswing that began in 2009 with shale gas volumes destroying the natural gas marketplace, the oil markets experiencing the same characteristics which led to investors exiting the industry in 2015.

In terms of the categories of systems difficulties being experienced in oil & gas. The traditional cottage industry approach of cobbling together some code to build a system is woefully inadequate in terms of today's oil & gas industry needs. Yet there are iterations of these products that dominate the oil & gas market today. Products that consist of consolidations of small providers who were cobbled together for financial survival purposes in an attempt to service the producers. Or SAP’s approach of their custom integrations in each and every producer that’s purchased their system, based on SAP’s standard configuration of a manufacturing concern. Another category of systems related difficulty being experienced today is in the producer organizations who’s history extends over decades and may also have picked up a rival producer or two along the way. Their systems are best described as legacy systems that their IT departments maintain and support. 

The question I have is how will oil & gas survive and prosper in their difficult and challenging future? Which is the best approach? Or does “muddle through” get it done. The legacy applications of producers today are failing due to the organizations demands on the products are not what they were designed for. I would suggest the key issue facing each and everyone of these classifications of systems used in North American oil & gas are the age of the products, but most importantly of all, the overall producer organization has failed. 

The persistence and energy by the status quo to maintain these systems, and the fact the ERP providers exist on shoestring budgets, is remarkable. The question then becomes how do we rebuild the industry to achieve the dynamic, innovative, accountable and profitable foundation necessary? People, Ideas & Objects, our user community and their service provider suggest it is on the basis of the Preliminary Specification which in turn uses the basis of the culture as described in these seven Organizational Constructs. Based on today’s Information Technology. 

Oracle Cloud Infrastructure

The values that Oracle and People, Ideas & Objects share has always been strong. Focused on quality products and services, cultural influences such as this series on Organizational Constructs reflects and the emphasis on innovation. 

Investors ceased additional funding as a result of the betrayal they felt when producers overstated their asset values and profitability. A process that began in the late 1970s and continues today. Their accounting does not reflect the situation accurately. Producers state that their accounting is fully compliant with the SEC requirements, of which it is. Which is a liberal and uncompetitive interpretation of the regulations that has unintended consequences reflecting ill intent on behalf of the producers. Since 2015 no remedial action to change these methods has been undertaken by producers. They’re waiting for investors to return and fund their capital programs. 

Conflict between producers and People, Ideas & Objects rages at epic levels. In oil & gas this conflict is also evident in the dealings industry has with Oracle. How much of this disarray in the systems area of the producers is attributable to their desire to have an obscure, non-transparent level of accountability, as we’ve suggested. And are poor quality ERP systems, due to the lack of appropriately funding them, producers viable scapegoat that keeps on giving. Much as the producer officers and directors contend that investors need to return to fund the industry again. Producers' capacity to change has been tried and tested, and found to be inadequate. Decisions need to be made to deal with the consequences of their actions of the past many decades.

OCI Revised Organization Construct, Part VIII

 New Growth Theory

People, Ideas & Objects have taken the administrative and accounting resources of the North American producers and reorganized them in order for independent, individual service providers to be able to focus on one process and turn producers' overhead costs variable, based on profitable production. In turn none of the producer's costs are fixed in the Preliminary Specification. Creating six substantial value propositions that are tangible and clearly evident. Which include:

• Maximize producer profitability by not diluting corporate profits through the production of unprofitable properties.
• Save the producers petroleum reserves for when they can be produced profitably.
• Reserves would no longer need to recapture the additional costs of past prior losses as future profits.
• Reserves are seen as a cost free means of inventory and storage.
• Removing the marginal production from the commodity markets ensures that prices dictate market activities. 
• While shut-in producers can focus their innovativeness to increase production, reserves or cut costs of the property and return it to profitable production.

Secondly and possibly more substantially in terms of being able to build value for the greater North American oil & gas economy. Specialization and the division of labor which has proven to be the primary method of building all of the tangible value for western civilization since 1776. There’s been no other method and therefore the application of our reorganization of the administrative & accounting resources based on these principles builds value to ensure profitable operations. The ability to further enhance the industries productivity through specialization and the division of labor will add unknown, unquantified and unqualified means in which to do so. This is facilitated through our permanent software development capability, our user community, the implementation of these principles in their service provider organizations and their iterative approach to enhance the Preliminary Specification. 

We have adopted an incremental method of building value on top of these two methods through the adoption of Professor Paul M. Romer’s “New Growth Theory” of non-rival costs. In a December 1, 2001 Reason article he summarized his theory as “People, Ideas & Things.” I adopted this principle and named this initiative People, Ideas & Objects as we are object based software developers. We’ve applied “New Growth Theory” and non-rival costs throughout the Preliminary Specification and elevated it to the level of an Organizational Construct. Standing on the shoulders of giants and most specifically Adam Smith’s Specialization and Division of Labor. Professor Romer has elevated business thinking in this direction and it is a new frontier in building value for organizations through the mitigation of costs in substantial yet unquantifiable ways and enhancing the performance of those that use these methods. 

Professor Romer’s theory is the basis of how cloud computing has brought such value to our economy. Users are able to share the costs of the heavy capital investment in technology, the capacity, capabilities, resources, maintenance and support costs on a variable basis, variable based on usage. Conversely providers are able to enhance their service offering through specialization and division of labor that would be otherwise unavailable to individual organizations. We have extended this thinking to include not only Oracle Cloud ERP but to add oil & gas administrative and accounting to the managed shared and shareable resource. Eliminating the need of each producer to build, resource and maintain the necessary non-competitive accounting and administrative infrastructure they need as dynamic, innovative, accountable and profitable oil & gas producers. Providing a standard, objective and value driven service that shares the sole objective of ensuring oil & gas producers achieve the most profitable means of oil & gas production, everywhere and always.  

The capture and implementation of Professor Romer’s theories are one of the seven Organizational Constructs of the Preliminary Specification. All seven are focused on building value for the producer firms and a tangible means to do so. They are available through the Preliminary Specification, our user community and their service provider organizations in this proposed configuration. They’ll be established with a permanent software development capability and user community that will iterate on these principles to bring further value over time. 

Professor Paul M. Romer

Published in October 1990 “Endogenous Technological Change” became the foundation of “New Growth Theory” in economics that has developed and is providing value throughout the economy through its application. In a Reason Magazine interview Professor Romer was able to explain many of the points of

Growth in this model is driven by technological change that arises from intentional investment decisions made by profit-maximizing agents. The distinguishing feature of the technology as an input is that it is neither a conventional good nor a public good; it is a non-rival, partially excludable good. Because of the nonconvexity introduced by a nonrival good, price-taking competition cannot be supported. Instead, the equilibrium is one with monopolistic competition. The main conclusions are that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that having a large population is not sufficient to generate growth. S71

Professor Romer won the 2018 Nobel Prize in economics for these principles. They are an incremental value-add to the traditional specialization and division of labor that has carried that weight exclusively until now. It is this principle of sharing non-rival costs that will mitigate what we believe to be the secondary reason for the systemic lack of profitability in oil & gas. High overhead costs are currently at the corporate level and we have shifted those to charge the actual, factual overhead costs as incurred by the service providers' billings directly to the individual Joint Operating Committee. There they become a cost of the properties product that is captured in the profitable price of the commodities sale. And therefore recaptured and returned through the sale to establish a cash float to be used for the subsequent months overhead costs. Currently producers capitalize their overhead and therefore are selling their product below cost and not recovering the cash that is incurred in the monthly overhead expenses. As they indeed state they are “putting cash in the ground.” Having to source new cash to finance their overhead expenses. Each month.

By sharing the administrative and accounting infrastructure, turning these costs variable based on profitable production, and applying specialization and the division of labor to the administrative and accounting areas through the development of our user communities service providers. People, Ideas & Objects are adding real value to the North American producers in terms of resolving what can be stated as their largest impediments to profitability. Chronic overproduction, or unprofitable production as we describe it and high overhead costs. Which leads to their unique characteristic and phenomenon of “putting cash in the ground” and “building balance sheets.”   

Oracle CloudWorld 2022 Conference

It was during this conference it became apparent that Oracle was pursuing the incremental value adding process that Professor Romer defined in his paper “Endogenous Technological Change.” Augmenting their generic business processes with service providers such as banks and logistics companies with fully optimized and integrated services with Oracle Cloud ERP, just as People, Ideas & Objects are approaching the unique oil & gas attributes. Each of us has an extensive software development workload ahead. I see at least 20 years of work to be done in this area. Incrementally building value upon prior innovations. 

The best example provided during the conference was the expense reporting features that were done with J.P. Morgan, Chase. Use of their credit card for business purposes would enable the user to select the classification of the type of expense. Then Oracle Cloud ERP would evaluate the charge based on the company's policies and determine its eligibility. If eligible it would be processed and payment made to the employee or the credit card company. Eliminating the massive number of hours and costs that are incurred in the process of expense reports by organizations during the year in their current systems to a few milliseconds of processing time. Whereas the cost to the organization to use Oracle Cloud ERP is incidental in terms of the time of Oracle Cloud Infrastructure and the engineering incurred to develop the specific system. These software engineering costs are amortized across the global population of Oracle Cloud ERP customers using the feature. To a lesser extent People, Ideas & Objects provide this level of service to the North American producers for their unique oil & gas attributes. The lesser extent being a result of the smaller population of users in oil & gas that we are targeting this development and implementation towards. Nonetheless North American producers have the opportunity to realize both the Oracle and People, Ideas & Objects innovations concurrently and at substantially reduced costs due to the theories of Professor Paul Romer. 

OCI Revised Organization Constructs, Part VII

 Information Technology

The Information Technology environment and the revolutionary impact that these have had on business in the past number of decades in terms of improved productivity, performance increases and leveraging value out of new business models. The promise of additional performance and productivity enhancements are just around the corner as these technologies have now matured, are more integrated and therefore able to provide businesses with even greater value. The key technology today and the one that we’re leveraging in this community is the establishment of cloud technologies. Introducing a shared and shareable cost model across its users. This is how People, Ideas & Objects et al sees this change. Instead of incurring large capital costs to acquire capabilities, manage complex systems and maintain resources in non-competitive administrative areas of their firms. Users are able to access their needs as a monthly operating cost. The shared and shareable cost model doesn’t end there. The costs of providing those services are provided on a variable, or as used basis. The producer's users will be provided with the most recent applications and the quality of technology service and support is increased through a further definition of specialization and division of labor. People, Ideas & Objects see cloud technologies as revolutionary to oil & gas. Having oil & gas producers accessing the same state of the art IT capabilities, capacities and infrastructure at low, variable and affordable prices would enable producers to participate in the expected future performance, productivity and value enhancements that they choose to. 

People, Ideas & Objects et al sees a further extension beyond the IT infrastructure, software, service and support. We have adopted the shared and shareable cost methodology of cloud computing and applied it throughout the oil & gas administrative and accounting processes and functionality conducted in the Preliminary Specification, our user community and their service provider organizations. What we call "Cloud Administration and Accounting for Oil & Gas." If we look at the difficulties of “what, how and why” producers are consistently unprofitable. We see the high overhead costs that are incurred within each producer are what we consider to be the secondary issue causing a systemic lack of corporate profitability. Building the necessary administrative and accounting capacities and capabilities, particularly in this regulatory environment, is costly to achieve and maintain. These high overhead costs are incurred by each and every producer on an independent, isolated, or unshared and unshareable basis by each one of the producers today. These are not core strategic competitive advantages. They are not competitive advantages from any point of view or perspective of the oil & gas producer. 

Attaining state of the art administrative and accounting capacities and capabilities are not seen as a necessity or desirable part of the producer as we’ve witnessed and are unfortunately experiencing. If anything, People, Ideas & Objects' multi trillion dollar value proposition should show that the need for attention in the area of managing the business more effectively and efficiently is necessary, desirable, achievable and tangibly valuable. Our shared and shareable business model through Cloud Administration & Accounting for Oil & Gas will achieve the variable, industry based administrative and accounting state of the art capabilities and capacities. This will be done with lower, variable overhead costs based on the producer's profitable production profile. 

When we listen to customers who have implemented Oracle Cloud ERP applications within their organizations there are a number of consistent and interesting messages coming through. The first is that their roles in senior management and officers of the firms change. They begin dealing with the prospective changes that are coming in the quarterly release of upgrades of the Oracle Cloud ERP offering. These are now in the area of around 200 individual "additions" per quarter. Note, the Preliminary Specification will also have their own specific additions once operational. These additions would either be the concern of the producers senior management or as we propose in the Preliminary Specification, our user community and service providers as the two possible means of dealing with them. The majority of these additions would be handled by our user community under the People, Ideas & Objects et al model and implemented, maintained and supported by their service providers. Input from the producers, as always, being funneled through to our user community, consolidated and optimized from the producers point of view. Let’s therefore put this task in the shared and shareable category of what a senior management and officers role consists of. Ensuring effective and efficient management of the producer's processes, both from a time, effort, cost and reduction of error perspective. Which brings up an important question. Who’s in control of this entire ERP ecosystem as proposed by People, Ideas & Objects et al? It will be the new greater oil & gas economy and most specifically the new producers who our users look to for input of any and all information. Our user community are deaf, dumb and blind to any others. Our software developers are deaf, dumb and blind to all others except our user community. 

The traditional approach to having a distinct ERP system that caters to the needs of a specific industry is to customize the vendor's application to do so. The vendor application sitting on top of the ERP system. This is not recommended by Oracle, and People, Ideas & Objects have adopted their policy in our user community and service provider licenses. Stating that all customizations, as Oracle defines them, of the application are to be avoided at all costs. This certainly seems to be at odds with what it is that we’re doing. The point is subtle and is a distinctive characteristic of the Oracle Fusion Applications. Other than Workday they are the most recently written applications of all ERP systems. They were the first ERP systems to be written in the Java Programming Language which introduces the full object model to those applications. The Fusion Applications are supported by the Fusion Middleware which is an advanced Java Server with expanded ERP function and process management written by the Oracle Fusion developers. Oracle Fusion Middleware is the base of the Oracle Fusion Applications. It is also the base of any “additions” that are written to provide industry specific application capabilities to the Oracle Fusion Applications. Using the object orientation features of encapsulation, inheritance and polymorphism. Enabling People, Ideas & Objects to embed the oil & gas industry features directly into the Oracle Fusion Applications through the Middleware as “additions.” 

Oracle’s method avoids a key difficulty in the environment where the needs of the users and producers are dynamic, innovative and rapidly changing. Any system changes at the Oracle Cloud ERP, or Fusion Application ERP level are therefore not going to necessarily break any of the People, Ideas & Objects customizations that sit on top, as there will be nothing there. The new quarterly release of Oracle features will be embedded with the “additions” from People, Ideas & Objects in the Fusion Middleware and therefore, as they too are object based, updated with the new features or unaffected by them without any of our additional developer involvement unless there are some exceptions during compile time. 

People, Ideas & Objects have chosen to pursue our user community, research and Intellectual Property as the three areas of our competitive advantages. None of these involve the development of the software code. We’ll own and provide the software code that is derivative of the Preliminary Specification and our Intellectual Property. We have contracted all of our software developments to Oracle Corporation. Their services division are well versed in their products delivery through its development and are provided as a service and capable. We believe we would need to dedicate at least a half decade in order to assemble a team of the size capable to deal with this project and then an unknown amount of time necessary to turn them into a functioning capable team competent to put out the quality of software necessary. We’ve been working on the development of our user community since the first quarter of 2014. A task we’ve assigned as our priority since then and one that will differentiate our product offering in terms of quality. Time is not the commodity available to the producers at this stage. Focusing on our user community and the IP aspects of this project is a better use of our time, resources and skills. It’s also where we see we can build value for the producers and how the software’s quality is best achieved. It is consistent with our belief that specialization and the division of labor will need to be applied to all aspects of the economy and by contracting development to Oracle we can do a better, more productive job.

If producers officers and directors believe these ERP developments can be done within their organization then why hasn’t that happened? Our scope of application development in the Preliminary Specification would be considered equal to what each and every one of the producers would need to undertake if they chose to continue to go it alone in their unshared cost model. The main difference is in terms of scale and its relative cost implication. Sharing the costs of People, Ideas & Objects development is substantially less than what the aggregate of each individual producer would otherwise need to expend. To acquire just the depth of understanding and detail necessary of the Oracle Cloud ERP offerings would require the same costs being incurred and replicated across the industry in each and every one of the producer firms. And that's assuming producers had a workable, profitable business model, or have a viable model developed within the next decade. A model that does not conflict with the Intellectual Property contained here. 

I could be reading things differently regarding the producers shareholders and bankers expectations. 2015 was when they began to express their discontent with the industry at large. The industries lack of performance, accountability and transparency were identified as issues by them at that time. I, like others, would never have assumed that eight years of comprehensive inaction was a tolerable amount of time. 

Throughout our writings we have alleged the accounting conducted by producers over the past four decades, and particularly the profitability reported, is specious. That overhead and other costs are handled inappropriately. Raising serious governance issues that have now resonated throughout the investment community and elsewhere with similar concerns. This accounting allegation of ours is that the specious accounting conducted throughout the industry is best obscured through poor ERP systems. Governance over the quality of the accounting and the companies systems has become an issue at the level of the board of directors in the past few years. However, in addition to the accounting, the ERP systems that are used throughout the industry are woefully ineffective. There are no tier 1 ERP systems providers selling oil & gas systems today and more importantly, outside of People, Ideas & Objects et al no interest. There has been abundant opportunity for producers to participate in the development of these systems. SAP provides ERP software to some of the senior senior producers but SAP does not have an oil & gas based application. The workarounds in SAP to accommodate the oil & gas industries' distinct characteristics are horrendous. SAP’s specialty are large manufacturing concerns like Ford who need to interact with tier 2 and tier 3 suppliers “just in time.” To bring wheel nut part z in d volumes to production line x at y time. SAP’s sale to Ford is more profitable for them than all the revenues they could ever earn from oil & gas. 

In May 1991 I contacted Oracle to begin joint development of oil & gas ERP systems. It was in 1992 we signed an agreement to do so and I feel Oracle threw their entire weight behind the project. This is the project that orchestrated my first failure in the oil & gas ERP market in February 1997. My point here is that not only myself but all the ERP systems vendors have been doing the job that was necessary. Without financial or any other form of support from the producer firms. It’s odd how officers and directors have prospered personally, accounting is as specious as it is, tier 1 ERP systems providers aren’t involved due to the lack of financial resources, the industry is such a spectacular failure and investors and bankers are unsatisfied. 

It was in our May 2004 Preliminary Research Report that I noted the research of Professor Anthony Giddens and Professor Wanda Orlikowski. They’ve defined Structuration Theory and The Model of Structuration. Which suggests that organizations, people and society move together in lockstep. Any disparity in one of the three's progress will create conflict and potentially failure. Professor Orlikowskis model suggests that technology is part of society which of course has a disproportionate influence today. We therefore applied this research and showed that Information Technology, particularly in the form of ERP systems, was defining and supporting the producer organizations, but also constraining them. Therefore I have alleged on many occasions that the purpose behind the use of old, stale and for lack of a better description homegrown ERP systems are what the producers have relied upon and maintained to ensure their franchise was competitively unchallenged and financially unaccountable. 

This is not to disparage my competitors who have done extraordinary work in impossible conditions. Officers and directors intentionally set out since May 2004 to not support any further developments of these systems by cutting off funding to People, Ideas & Objects and other ERP suppliers. What was a thriving ERP marketplace in the 1990’s with over 20 providers leaves a dominance by P2 who are a consolidated accumulation of many other ERP providers solutions that were unable to continue profitably. And at the same time we’ve seen the maturation of the IT market overlooked by these producer firms in the administrative and accounting areas. Whereas producers have declared frequently the latest version of Microsoft Windows was moving them forward on a renewed trajectory. Unknown and undetermined at the time if it was an upward trajectory. It’s always appropriate for producer firms to state the latest IT trend as to what “sounds good” from a progressive, assertive oil & gas user of IT. These items include the Internet of Things, Artificial Intelligence, Machine Learning or whatever technology promises the biggest bang for the buck. 

Oracle CloudWorld 2022 conference

There is a clear divide in terms of the consumer facing applications from those that are provided to corporate customers. The user interface is not an area that has attracted much focus in the enterprise world it would seem. The issue appears to have been the complexity of enterprise applications makes the user interface more difficult to design and implement. Oracle appears to be making some changes in this area with their Redwood Platform for enterprise applications which they began developing four years ago. I highly recommend reviewing these two videos, here and here.

People, Ideas & Objects key competitive advantage, our priority and our focus is our user community. Establishing quality enterprise applications demands user involvement. Which is the difficult, time consuming process that we began in the first quarter of 2014. Based on a unique User Community Vision our users have the tools to build the application that producers need to ensure they produce the most profitable means of oil & gas operations everywhere and always. 

Our method of approaching the issues in oil & gas is focused on quality. With Oracle we can see they’re constantly pushing the envelope in every aspect of their products and services. Our user community will have these resources as part of their toolkit to ensure they maximize their opportunities to solve the difficult issues they’ll be faced with. And importantly they’ll be augmented with a rich and diverse level of Oracle communities of developers and user groups that will be available to assist them. Once our budget is secured, People, Ideas & Objects, our user community and their service providers will be able to maximize this opportunity with Oracle’s products and services and achieve what we’re setting out to do. 

OCI Revised Organization Constructs, Part VI

Markets

Three modules of the Preliminary Specification are “market” modules, including the Resource Marketplace, Petroleum Lease Marketplace, and Financial Marketplace modules. Each establishes marketplaces where producers can engage in the markets which they need to function. The marketplace modules mimic the three markets that producers participate in and are designed to deal with the day to day activities of each of the producers, service industry and others. Supporting them with the contractual, transaction processing and other capabilities of Oracle Cloud ERP the Preliminary Specification, our user community and their service providers in our Cloud Administration & Accounting for Oil & Gas. Enabling producers to apply their competitive advantages and strategies in the greater oil & gas economy. 

The economic principles of markets and price discovery are two of the mechanisms by which North America has advanced its overall quality of life. Adoption of these within the oil & gas industry are therefore a necessity and the Preliminary Specification will do so as part of the structures that define and support these industries. Our decentralized production models price maker strategy relies on the principle of oil & gas commodities being priced based on the price maker principle. The need for producers to produce only profitable production, after full consideration of all of their actual costs on a timely and accurate basis, is how they’ll operate with Cloud Administration & Accounting for Oil & Gas. Using all of the information contained within the commodity markets price, (production, inventory, consumption, reserves) to determine profitability and ultimately what will and will not be produced. It is these same mechanisms that are involved in every transaction involved in a free market. 

From the Preliminary Specifications Resource Marketplace module we quote from a paper written by Professors Richard N. Langlois and Nicholas J. Foss entitled “Capabilities and Governance: the Rebirth of Production in the Theory of Economic Organization.” they note.

The organizational question is whether new capabilities are best acquired through the market, through internal learning, or through some hybrid organizational form. And the answer will depend on (A) the already existing structure of capabilities and (B) the nature of the economic change involved. p. 21

And

If by contrast, the old configuration of capabilities lies within large vertically integrated organizations, creative destruction may well take the form of markets superseding firms. History offers many examples of both. p. 21”

And

Either way it boils down to the same common-sense recognition, namely that individuals - and organizations - are necessarily limited in what they know how to do well. Indeed, the main interest of capabilities view is to understand what is distinctive about firms as unitary, historical organizations of cooperating individuals. p. 17

In terms of the Resource Marketplace module we first need to discuss two components of how operations are conducted in oil & gas. The reliance on the field service industry providers to extend the producers capabilities and capacities into their regions of interest. If producers were to own and operate their field infrastructure it would otherwise be an impossible impediment and constraint towards progress. The second component is the history of abuse and disrespect that producers have displayed and presented to the service industry over the past forty years. And particularly since 2015 when producers recognized their financial difficulties were amplifying. The status quo long ago accepted the assumption that oil & gas is a boom / bust industry. All other industries sought to work these issues out of their businesses and industries many years ago. It is this continuing acceptance by producers that has left us with a legacy of maybe six good years out of the past thirty six. Officers and directors don’t understand this argument as they’ve experienced thirty six years of superior executive compensation. Producers assumed the service industry would adjust to the boom / bust trend in lock step with them. There is an implied assumption that the service industry, like the oil & gas industry itself, enjoys revenues as a primary industry and therefore continues business as usual during any of the bust cycles. The diversity of the service industry offerings, and their coverage across the various regions of their operations throughout North America spreads them thin operationally. As secondary industry participants they are not as resilient as the producers believe them to be. Scaling back from 1,900 active drilling rigs to 400 during 2015, forcing 50% price reductions on to the drilling operator or they would use another vendor, the producers induced a collapse of their revenue streams into the low teens in terms of percentages of prior levels, which has been devastating on the financial health and viability of the entire service industry.

Now in 2023 the repercussions of this downturn have decimated much of the service industries capacities and capabilities that were once available to producers. The largest service industry providers have left the continent as a result of the abusive treatment they’ve received. Therefore for producers to be working out the boom / bust cycle through our price maker strategy will go a long way to rectifying this issue in the long run. Profitability everywhere and always will build a stable infrastructure throughout the greater oil & gas economy. Providing a stable environment, or constant level of demand for which the service industry can prosper. 

After this and similar treatment over the past four decades investors in the service industry are unwilling to participate in the rebuilding of their much needed field operations. They invested in good faith and were abused by the producer firms. They’ve witnessed the equipment they invested in being cut up for scrap metal to pay the light bill and taxes on the shop. This was due to the producers determining they could get away with leveraging additional field activity by not paying their bills for 18 months after the jobs were completed. Producers should have enlightened the service industry representatives of these plans beforehand. The dilemma today is who’s going to provide the financial resources for the service industry to recapitalize itself and reestablish the capacities and capabilities that will be necessary for a self-sufficient and profitable oil & gas industry? The service industry feels the producers broke it, they can fix it. Maybe when they have some skin in the game they won't be so abusive.

This is what’s known and understood in the market today, it’s not news. Producers expect the service industry to resume normal operations, yet fail to consider the consequences of their prior actions. A similar example is the history of the ERP providers in oil & gas over the past thirty years. I can report there’s still no consideration whatsoever of a second chance these first tier ERP providers will be riding to the rescue of the producer firms. Why, they feel the industry is too complex, too costly and there are not enough producers to be able to negotiate their sales prices fairly. SAP is a custom implementation for each sale. The last two ERP providers left in 2000 and 2005, as documented on page 17 of our White Paper, due to the inability of producer officers and directors to pay for their software development in advance. The only method that these vendors would approach the industry. Producers have had ten years to invest in the Preliminary Specification to make their organizations profitable and accountable and to avoid this inevitable, predictable and fatal outcome but didn’t do so. Not a penny has been spent on People, Ideas & Objects at any point. The need for skin in the game is the apt approach when so many oil & gas ERP investors and vendors have been betrayed so comprehensively three decades ago and as has now been done to the service industry. People, Ideas & Objects are instilling market principles in the producer firms, that however does not imply that those who support them have the inherent trust in producers as a result of their prior actions to be able to rely on market mechanisms at this time. 

As the producers sit upon the primary industries revenues they so enjoy. They will show a thumbs down to this idea as if People, Ideas & Objects is the only vendor they’ll be faced with who has this ludicrous prepayment idea. Officers and directors actions have consequences which have been wholly detrimental to everyone else in the industry. Officers and directors will no doubt argue, rightly, this does not remind them of what markets and price discovery should look like. Correct, it's what’s necessary after the destruction of the markets they’ve caused. 

These facts on the ground are what the officers and directors refuse to consider or admit. Until they do the industry will be beset with problems. These issues need to be dealt with and I am unaware of any other solution. The need to rebuild these industries brick by brick and stick by stick must be financed by the only means now available. The primary industry revenues of the dynamic, innovative, accountable and profitable oil & gas industry. Facilitated through the Preliminary Specifications Resource Marketplace module and decentralized production models price maker strategy. Granted there will be those within the service industry that will continue to scrounge for the pennies falling from the officers and directors pockets. However, that does not create the dynamic, innovative, accountable, profitable and energy independent oil & gas industry that we need. 

The Financial and Petroleum Lease Marketplace will also implement the market's organizational structures into the Preliminary Specification and provide the organized interface necessary to access and interact within these markets. Modules in which the full transactional power of the Preliminary Specifications ERP system supports the activities within these markets. We’ll also briefly discuss the Marketplace Interface that we’re building as I believe COVID provides the opportunity to adjust one's opinion to the use of this feature. I have suffered the slings and arrows, the ridicule for it in the past and there is not much that can stand in disagreement to what I haven’t already heard. In my opinion it is revolutionary and needs to be seen in the context of the changes that occurred in 2020 - 2022. At a minimum it adds an element of serendipity to working from home. One issue that I may not have been clear about is the Marketplace Interface is a virtual representation. Users will be able to access it through any screen on any of their devices. It does not use a headset for the person.

The Petroleum Lease Marketplace module is as one could imagine. An opportunity to post, bid, purchase, sell mineral rights and producing properties in the marketplace that exists and is replicated virtually within the Petroleum Lease Marketplace module. Everything from the opportunity to participate in a joint venture to establishing the surface rights payments is fully supported by the ERP system of the Preliminary Specification. Our product sits on top of Oracle ERP Cloud which includes their tier 1, Oracle Fusion Applications that Gartner rates as the highest quality offering. These oil & gas markets include the data of the Federal, State, Provincial, Freehold and Offshore leases. An opportunity for industry to consolidate on a dynamic platform which uses proven tier 1 technologies with the constant support of the service providers maintaining transaction administration and accounting in a standard and objective manner. (Note: People, Ideas & Objects have maintained the policy, and it is written into our user community and service provider licenses. That we will maintain arm’s length distance from all royalty administrations. We are operating in the best interests of the oil & gas industry. To ensure that they are provided with the most profitable means of oil & gas operations. There will be no compromise on this anywhere within this community.) This will be enhanced with the constant iterative design and development being undertaken by People, Ideas & Objects user community and developers on a permanent basis. Whereas if a jurisdiction reviewed and changed their royalty rates at some point, in terms of either the rate or method calculated, producers would not need to concern themselves with the administrative or accounting aspects of those changes. Our user community, developers and service providers would have them covered and implement the necessary changes in the software and services in a timely and accurate manner. Producers would only need to deal with any issues regarding the revised costs of the royalty. 

Administration and accounting are not competitive advantages of the producer firms. Thankfully that is one of the statements that we’ve received no pushback on. That doesn’t mean that these areas have to be a hodge podge, slapped together system that only makes do. There’s no reason why the industry shouldn’t have achieved state of the art ERP systems within their firms. That producers haven’t, has led to many questioning not only the integrity of the accounting but also the systems that are being used by industry. This questioning should never have been necessary and implementation of tier 1 ERP systems is now an explicit demand of the investment community. Oracle Cloud ERP is the premier tier 1 ERP system in the market. 

And why is it that the issue of overproduction, or as we define it as unprofitable production, can be documented to have existed in the North American marketplace back as far as July 26, 1986? The solution we propose to the overproduction issue, in addition to aligning all of these organizational constructs which has been available since August 2012. In terms of markets, it is alleged that there is double the amount of oil needed up until 2050. This capacity overhang forces North American high cost producers to assume the swing producer role and produce only profitable production. Saudi Arabia's production costs of $3.00 and probably $0.00 capital costs and could therefore produce profitably at any price during the next 28 years. They could use the money, and markets in 2050 are too far away and unpredictable for them to sit back and wait for. 

The third marketplace module is the Financial Marketplace module. Moving to the Joint Operating Committee as the key Organizational Construct of the dynamic, innovative, accountable and profitable producer is achieved through the Preliminary Specification. In the Joint Operating Committee section we noted that the movement of the knowledge, which includes the detailed actual, factual accounting information for that specific property, to where the decision rights were held, which is the Joint Operating Committee, enhances accountability. It's here that the Financial Marketplace enhances that accountability with the board of directors' interaction with their current and prospective shareholders and bankers. A review of the Financial Marketplace modules specification would be the best source of information to capture an overall understanding of the module. With the standard and objective nature of the accounting that is conducted throughout the Preliminary Specification and the service providers. Would that satisfy some of the issues that investors and bankers have raised regarding their investments and loans in the industry? Where everything being produced is profitable and the producers are seeking to maximize their profits by shutting in unprofitable production. Would People, Ideas & Objects, our user community and service providers be helping producers satisfy their shareholders and bankers to the point where they’d begin investing in the industry again? 

OCI Revised Organizational Constructs, Part V

 Innovation

People, Ideas & Objects et al need to be concerned about the startup to junior sector as much as any other classification within the industry. This 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 operations everywhere and always, and providing consumers with the lowest possible cost of an abundant and reliable domestic 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. Achieving profitable, North American energy independence.

Enter two variables that were not available in prior decades and centuries. The cloud computing era with the maturation of the overall technological infrastructure that is best represented by the Internet. We are at the infancy of what the Internet can provide. And the second variable being the “service” aspect of our user communities service providers. It was discovered in our research that the level of innovation that is attributable to the small and medium sectors of an industry were as substantial as the larger sectors. Although the larger sectors contributed large amounts in terms of total spend it was no greater than the effect of what the other sectors contributed. People, Ideas & Objects et al provides our solution for all sectors of the North American oil & gas industry and for all producers. Professor Giovanni Dosi was one of the key sources of research that we used to determine the framework necessary for an innovative oil & gas industry. Innovation within a science and engineering based business is therefore an inherent part of both these demands for profitable operations and consumer affordability. Professor Dosi’s paper “Sources, Procedures, and Microeconomic Effects of Innovation” September 1988, discusses and asks what are “the sources of innovations opportunities, what are the roles of markets in allocating resources to the exploration of these opportunities”?

People, Ideas & Objects research in oil & gas focused on these points: 

• The main characteristics of the innovation process. 
• The factors that are conducive to or hinder the development of new processes of production and new products.
• The processes that determine the selection of particular innovations and their effects on industrial structures.  (p. 1121). 

There are two major issues identified by Professor Dosi: 

• The first issue is the characterization in general of the innovative process.
• And second, the interpretation of the factors that account for observed differences in the modes of innovative search and in the rates of innovation between different sectors and firms, and over time. (p. 1121). 

Professor Dosi then makes the statements that, 

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

Capabilities and stimuli generated with each firm and within the industry of which they compete. (p. 1121). 

The purpose of People, Ideas & Objects research in oil & gas was to focus on the organizational capability and capacities of the firm. Specifically in the earth science and engineering disciplines. It was also emphasized that innovations are based on both the firm and the industry. Coordination of the capabilities and stimuli of both the firm and the industry would therefore need to be advanced through changes in the organizational structure of both.

• Broader causes external to the individual industries, such as the state of science in different branches, the facilities for the communication of knowledge, the supply of technical capabilities, skills, engineers, and so on;  (p. 1121). 

Additional issues include 

the conditions controlling occupational and geo - graphical mobility and or consumer promptness / resistance to change, market conditions, financial facilities and capabilities and the criteria used to allocate funds. Microeconomic trends in the effects on changes in relative prices of inputs and outputs, including public policy. (regulations, tax codes, patent and trademark laws and public procurement.) (p. 1121) 

As People, Ideas & Objects would suggest these define an organizational construct that innovation demands in order to either flounder or foster. As both an Organizational Construct in itself, and as we defined in the Joint Operating Committee, a framework of that key construct. What we can impute from this definition of innovation is that it is a defined and replicable process that can be established through organizational design. And this design must be part of the organization's ERP software that identifies and supports that organization and its industry, such as the Preliminary Specification is configured to do. 

Our second source of primary research material regarding innovation came from Professor Richard N. Langlois. Throughout our review of his work we were able to determine the appropriate nature of the organizational design of the producer firm and the oil & gas industry itself. Selecting specific areas of the firm or market as to which the process and its management should fall under. Where the capabilities should reside. By fully implementing the Internet and using Professor Langlois research, which included Professor Carliss Baldwin determination of where exactly that transfer between firm and market should occur. We were able to design the appropriate software tools, such as our task and transfer system that will enable our user community to define which processes to undertake and manage in their service provider operations. Introducing enhanced efficiency in the manner in which the administration and accounting is conducted in oil & gas. 

Building on the other innovations that are rapidly providing value generation such as cloud computing. People, Ideas & Objects, our user community and service provider organizations are able to undertake this through the introduction of our Cloud Administration & Accounting for Oil & Gas. A service that turns the fixed producer overhead into a variable industry based overhead that can be provided to any producer no matter what their size or production profile. Enabling producers to shut-in unprofitable production, and therefore incur a null operation, and only produce profitable properties, maximizing shareholder value. A substantial portion of our published value proposition of $25.7 to $45.7 trillion over the next 25 years is attributable to introducing this production discipline to eliminate the damage and destruction caused by overproduction over these past decades.

The Preliminary Specification has captured this understanding of innovation and incorporated it within the culture of the industry we are rebuilding in these Organizational Constructs, and as part of the innovation framework of the Joint Operating Committee. Each of the fourteen modules of the Preliminary Specification are materially affected when we identify the Joint Operating Committee as the key Organizational Construct. That provided us with an opportunity to incorporate this understanding of innovation in the design and reorganization of the oil & gas producer firm and industry. These can be identified by several major processes of innovation within the Preliminary Specification. One of these ensures that failed innovations and experiments, and their underlying processes are not repeated by separate and distinct areas of the organization, each year. Attempting the same failed “ideas” repeatedly is not innovation. Another major process of innovation is to enhance the scientific basis of the producer firms and industry as a whole. Moving forward on the basis that an idea that would generate a dollar today will only produce ten cents tomorrow. We therefore must increase the volume of ideas generated and incorporated in our work processes to continue increasing our value. Various other processes of innovation have been incorporated throughout the Preliminary Specification based on the primary research conducted by Professors Giovanni Dosi and Richard N. Langlois. Enabling producers to earn the unquantifiable value that needs to occur throughout each of the producer firms and all tiers of the oil & gas industry in the decades to come.

Oracle Cloud Infrastructure (OCI)

Continuing our discussion regarding the recent Oracle CloudWorld 2022 conference. The incremental and continuing value that producers need to generate through enhanced innovation can be facilitated through the development and implementation of the Preliminary Specification. Oracle’s products are the stand alone premier technologies in database, systems development and ERP systems and the base of the Preliminary Specification. Oracle is now partnering with service providers to enhance their products with a variety of service providers in order to bring about the innovation based benefits we have been discussing throughout the Preliminary Specification. Theirs will be in the domain of the generic business processes such as banking etc, or the non oil & gas specific processes that we handle through the 14 modules of the Preliminary Specification. Our proposed combination of Oracle Cloud ERP, People, Ideas & Objects, our user community and their service provider organizations are designed to deliver the foundation in which the producers, the oil & gas industry and all the tertiary industries can succeed in the 21st century. Without these facilities and capabilities the question we would ask is how will industry “muddle through” so many of these issues and opportunities otherwise?

Since Oracle’s beginning they have pioneered the development of their technologies to be the premier tier 1 provider in all categories of their offerings. Oracle has been the critical and essential innovator in each of their products markets. They continue today with products such as Oracle Cloud ERP and Oracle Cloud Infrastructure that continue that heritage. Recently with the Oracle CloudWorld 2022 conference we saw a new direction beginning with their development of service providers to augment their products. These new products and services bring tremendous incremental value to the oil & gas users of these Oracle products. And are consistent with the work that People, Ideas & Objects have undertaken to complete on behalf of the North American producers. 

Innovation throughout the business and industry specific process management, built upon the premier tier 1 Oracle products augments the dynamic, innovative, accountable and profitable nature of what is demanded of the North American oil & gas producers. This is not a static environment. It will be throughout our user community and their service providers that producers will be able to interact with all aspects of the business and industry specific process management. To make changes, to innovate and develop these further which is an inherent part of the People, Ideas & Objects and our user communities permanent software development capability. But there’s more.

With the producers configuration being oriented towards this innovation Organizational Construct. With the Joint Operating Committee Organizational Construct holding innovation as one of its seven frameworks. Not only oil & gas producers, but the entire oil & gas industry and its tertiary industries and supporting institutions will be culturally aligned and oriented through Oracle Cloud ERP and People, Ideas & Objects Preliminary Specification towards innovation in the earth science and engineering disciplines. Providing the means to rebuild the industry in this configuration with the software that defines and supports these objectives. Where the industry's approach towards its next 25 years can be the most dynamic, innovative, accountable and profitable of its history. A future that is unquestionably the most demanding, challenging and exciting in its history. 

OCI Revised Organizational Constructs, Part IV

 Intellectual Property

The Preliminary Specification establishes a solid foundation for which the Intellectual Property of individuals within the industry becomes available to those original authors, innovators and entrepreneurs. This is provided through the Resource Marketplace, Research & Capabilities and Knowledge & Learning modules that were published here in final form by August 2012. From the Resource Marketplace module I summarized the point as.

Another key point is the tearing down of the basis of Intellectual Property (IP). An industry such as oil & gas which is based on its earth science and engineering needs. After all, it is a business based on science. If we are to expand the capabilities in science and innovation in the industry. We are going to need to solve many very difficult problems. And as we progress, the volume of ideas needed will be an order of magnitude of what is required today. These problems cannot be solved in an environment where there is no upside for the individuals to solve them. Addressing the motivation to solve these problems and enabling the people to earn the rights to their Intellectual Property through the People, Ideas & Objects application modules is the first step in making the necessary industry wide changes. This therefore will turn the oil & gas industry into a far more dynamic business.

With the state of the industry as it is, its IP is in disarray, the capabilities and capacities that are derived from it are deteriorating as we speak. Making this somewhat of an IP gold rush in the industry, in order to save it. Producers' difficulty is that none of this is published and the act of publishing is how copyrights are earned. Let me pass on one more important fact that I’ve determined since I’ve been so reliant on copyright. Patents and trademarks are defensive, in nature in that they protect what is known of your IP. Copyright is offensive and allows expansion of one's Intellectual Property. Building on the shoulders of giants. Copyright does not secure for you the rights to an idea. It only provides you with the monopoly rights to the expression of that idea. Implying it must also be pursued and maintained much in the manner that I do here at People, Ideas & Objects. Until the Resource Marketplace and other modules of the Preliminary Specification are built I see this IP of the industries earth science and engineering unclaimed. Therefore the first thing we must do for the dynamic, innovative, accountable and profitable producers in the oil & gas industry is change their competitive advantages. They'll now read: 

Coordination of the markets earth science and engineering capabilities and capacities, their land and asset base. 

One of the most promising forms of IP today is software and algorithms, Artificial Intelligence and Machine Learning. What if these were also the foundation of a producer firm as competitive advantages, generating revenues for these producers and the people who developed them in the form of service revenues, license fees and royalties etc? Helping to establish the new and innovative oil & gas industry.

Business is changing quickly. Intels dominance in the chip market is now a constraint that is causing them to lag that market in consequential ways. As the dominant manufacturer of processors, theirs has been deemed a redundant business model. The business value is no longer in the manufacture of processors, it's in their design. Contract manufacturing is a commodity business where others are finding profits and opportunities in that area where Intel does not compete. In terms of design being the value, that is now the case and you should read the summary of Ampere Computing’s Leadership Team that now has one of the most powerful processors available in commercial volumes. Oracle has declared they’re moving their cloud offering to Ampere processors, which Oracle’s Cloud is offering today, and People, Ideas & Objects will be running the Preliminary Specification exclusively on Ampere which will be far better due to the better cost / performance than the Intel based cloud computing can offer. 

This is the new business world and these are the new business rules. It comes down to one word, the individual. If you don’t see what the rebels at Intel did when they established Ampere your best opportunities may remain with the current bureaucracies. Individuals in technology, oil & gas and everywhere are facilitated by that great innovation known as the door. The Internet demands one thing which is the one thing that’s difficult to achieve. The software to organize. To organize society today, with its global reach, can not be done in a spontaneous manner. There is no serendipity when individual A meets individual B 2,000 miles away on the Internet through software providing them the means to conduct their business. Software defines and supports the organization. Without People, Ideas & Objects none of this oil & gas vision will come about by sitting and waiting for the phone to ring. At least it doesn’t appear to have happened.

The question also needs to be asked: why is it that Apple continues to innovate consistently? Although their products are more costly, they bring incremental value to their customers through the innovativeness they provide. They too rely on Intellectual Property as the basis of their value. They in fact consider themselves a software company that sells hardware in order to bring about that customer value. Again, software defines and supports their organization. What fool would run a company that sources their handful of products from a number of countries that total in excess of 3.5 billion in population? And then have the gall to snap their fingers and say “now innovate.” It doesn’t happen without software.

It’s no longer enough to just own the oil & gas asset, you must also have access to the software that makes the asset profitable. We now believe as a result of the Oracle CloudWorld 2022 conference that all firms in all industries will have distinct competitive advantages by using Oracle Cloud ERP. These should be seen as incremental to the benefits of People, Ideas & Objects et al. The importance of IP in the oil & gas industry is it will organize innovation. The most productive innovation is when it’s organized under a structure that provides for the market to focus on its development. The North American marketplace established IP centuries ago and we have reaped its benefits. The United States included copyright in its Constitution. Copyright has to be published in order to be earned. Exposing it to the market where it can be built upon and enhanced by others. It reduces the “me-too” phenomenon that producers have created in the past to generate price competition in the service industry and elsewhere and ensure everyone was rendered “blind sleepwalking agents of whomever would feed them.” Is this how an innovative industry is going to be built, with producers sitting on top of a primary industry and using its revenues to endow their favors with the rewards of a penny or two here and there? Are the oil & gas issues we’re faced with to be resolved on this basis?

The organizational structure of the new oil & gas industry People, Ideas & Objects et al will be building has innovation structured and based on the laws of the land. It will be these laws that define what innovation is undertaken and what is not. The violation of another's copyright is not allowable under the law so there would be no violators. A self policing mechanism reducing the overall costs of unnecessary, endlessly repeated duplication of innovation in the industry. Providing the incentive for those with a few ideas of their own, and as a result, the inherent motivation to do the subsequent hard work that is necessary. Knowing their work will now be trusted and respected. To do so not just for today, but for always and everywhere. 

These copyrighted publications enable an understanding of how things are done. Building upon that understanding with additional innovations. Intellectual Property therefore provides us with a strong legal structure that promotes innovation, eliminates the costly redundancy of duplication of efforts, educates and provides the motivation to do the difficult and challenging work we can all agree is the foundation of the industry. This applies across the greater oil & gas economic structure and includes the secondary and tertiary industries. The 21st century will be known for the leverage of Intellectual Property, or intelligence. Much as the last century has been about the leverage of mechanical work. Avoiding this new reality or attempting to opt out would be foolhardy in the extreme.

What is the motivation for people to develop these “ideas” of theirs? Are they not in it for themselves and looking to siphon off what they can from the industry? Self interest is a part of every human endeavor. It comes down to whether or not it builds value. Officers and directors have been well compensated and the industry has been destroyed. A further contrast is the fact they’ve not been motivated by the discovery of ways in which they can build value. Intellectual Property is therefore not only a structural Organizational Construct that can enable the means to control the innovation process throughout the industry. The motivation behind the participants is purely from the point of view of building value through the establishment of incremental profitability, reduction of cost, improved production deliverability or the expansion of reserves. It is the law, and most importantly of all, proven. The reason the United States dominates the global economy in terms of performance is due to the fact their Intellectual Property laws provide the motivational and organizational principles of how their economy and society operate. It assumes people are Intelligent beings, not serfs like the officers and directors assume. It is productive, constructive, focused on generating value and is an overall benefit to society. As a science and technology business, that is reputed to be second only to the space industry in terms of complexity. What has and what have these officers and directors been doing under their business model?

The business model of the producer firms, I believe, was and is to have a pool of knowledge freely available to them when and where they want it and need it at its lowest possible costs of nothing. Therefore they couldn’t have anything published in this environment as it would be counter to their best interests in terms of any of their availability and access to this pool of Intellectual Property. And therefore nothing has been documented in the industry from the point of view of the science and technology of earth science and engineering. Leaving themselves fully exposed at this time through the publication of this IP by any author.

Two other aspects of Intellectual Property are first, what’s known as the safe harbor provisions. Why don’t producers just turn around and launch a lawsuit against the copyright holders? This would be an unfortunate world where “big” ruled the earth and we serfs would be the drones who were forced to cooperate with their every command. The safe harbor provision states that you can not launch a lawsuit against the copyright holder. Secondly, the division of tacit and explicit knowledge. Tacit knowledge can not possibly be captured or written down. Only explicit knowledge can. Therefore it is up to people to take the explicit knowledge they have, earn the copyright, and apply their tacit knowledge to generate their value as a service. The services associated with Intellectual Property are as important as the IP itself. Just as People, Ideas & Objects have our user community heading up the service providers that are delivering our software and their tacit knowledge providing services to the producer firms. Therefore fulfilling our need to have the effective and efficient delivery of the tacit and explicit knowledge underlying the Preliminary Specification. The ability to manage and implement the producers' second revenue stream is through the Work Order we identified earlier. 

These efforts of ours to use the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil & gas producer began in August of 2003 with a research proposal to industry. People, Ideas & Objects subsequently conducted that research ourselves which was completed with the publication of the Preliminary Specification. A full decade of rigorous research that is reflected and absorbed throughout this blog and elsewhere. And now that the obvious need in the market for this ERP system has come about, Boards should be aware that the time taken by People, Ideas & Objects to conduct this research, to effectively deal with these issues and resolve them has offset what would be industries largest cost of all. The time needed to generate a sustainable, viable, workable business model. We enable them to yield untold value creation in the short term and not have to undertake that ten years of research themselves. In addition our three strategic competitive advantages are our user community, research and Intellectual Property. Anyone offering similar aspects to the Preliminary Specification in their ERP software would be violating our Intellectual Property and we would expect, as law abiding citizens, the oil & gas producers and its employees would adhere to these principles of law, recognize that and refuse to use any software that violates that. 

It is People, Ideas & Objects, our user community and their service providers that are channeling these Organizational Constructs towards innovation, productivity and profitability through software. It is software that defines and supports the organization. The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that are and have been proven to be disastrous.