OCI User Community Vision, Part I

 People, Ideas & Objects User Community Vision

The lack of profitability has decimated all oil & gas business value generated before the 1980s. The subsequent investment capital and all the revenues earned were fruitless when the business stands today without the ability to support commercial operations or meet consumers' energy demands. This damage extends to service industries' capacities & capabilities. And includes the fact that the oil & gas and service industries capital structures are incapable of reviving commercial operations. People, Ideas & Objects has documented throughout the Preliminary Specification our approach for the current lack of profitability. The source of our software product quality, oil & gas industry leadership and profitability is our user community and we have configured it in a manner that enables it to address the scope of this issue, formulate the solution based on the Preliminary Specification and deliver that to the North American producer marketplace. Our user community differs greatly from any other user community created to develop ERP systems. This is to ensure they succeed in their task and make the transition from today’s culture of failure. Instead, they will be part of a dynamic, innovative, accountable and profitable oil & gas industry and producer. Where oil & gas production in North America is profitable in the real sense of the term, everywhere and always. Able to address the most challenging future we’ve faced before.

Quality ERP software is achieved through user driven software development. This has been proven and became the foundation of the agile software development methodology. An understanding of the oil & gas administration and accounting can only be gathered through the direct involvement of those who are familiar with the processes, data, issues and opportunities. This understanding is captured and defined for our software developers by the People, Ideas & Objects user community. To expect that our software developers who are specialized in their software skills will be able to comprehend the full understanding of the accounting and administration needs of the industry, without user involvement, is a foolish expectation of a by-gone era. 

It is therefore People, Ideas & Objects' obligation to ensure this initiative succeeds. Quality software is developed through user community software development. This is where we’ve focused our efforts since March 2014. We have made our user community one of People, Ideas & Objects' three competitive advantages. These consist of Intellectual Property and research to round out our offering. Our user community is our primary focus and highest priority organizationally. It is the area of our offering in which we can effectively implement the level of organizational change, cultural change and product quality necessary. 

One of the solutions proposed by oil & gas producers was consolidation which occurred a few years ago. Centralized control of interactively complex systems is not effective and lead to failure. There needs to be decentralized control with markets able to make the necessary changes. Interactive complexity is one of the challenges facing producers today. The ability to deal with the issue as it arises through a structured hierarchy, with excessive regulatory oversight governing the producers' actions and operational decision making authority being governed by the Joint Operating Committee has created paralysis and inaction. 

It is the configuration of our user community that makes it unique. We have licensed our user community members with the authority and responsibility of what is expected of them as an independent, decentralized resource. They’ll have the authority to affect the changes they need to make. They are, and will be for the long term, the ones that the industry will turn to to resolve their ERP software related issues and opportunities. It will be our user community members who are authorized to initiate the necessary changes and only our user community members. The structure we have provided has three components which will enable them to build the appropriate oil & gas ERP software from the vision of the Preliminary Specification.

• Only our user community is licensed to make changes and prepare derivative works to any underlying Intellectual Property of the Preliminary Specification. 
• People, Ideas & Objects licensed developers can only look to our user community for input. Our developers are blind, deaf, and dumb to others.
• Our user community has their own budget. They are independent business people. Not "blind sleepwalking agents of whomever feeds them."

User community members are the only individuals and / or groups who can change the Preliminary Specification and its derivative works. People, Ideas & Objects' business model is based on a fundamentally different method of developing ERP software. Therefore our user community will always have the exclusive use of People, Ideas & Objects software development capabilities to affect the changes they need and want. Our user community members will be the only ones who can configure the software. It will not be driven by technical architecture, business cycle or other criteria. Their license to amend the underlying Intellectual Property is exclusive to our user community. Providing a single point of contact for producers to have their issues and opportunities resolved. Whom do they go to today? Enabling a dynamic, innovative, accountable and profitable oil & gas industry.

Second, our user community has the oil & gas industry's business model. Use of the Joint Operating Committee and the six other Organizational Constructs is a strong model that solves the administrative, accounting and operational issues. This enables the producers to realize opportunities in the industry. This business model and its future development are in our user community's hands. Included with user community members participation is the granting for development and operation of a service provider organization that is licensed for an exclusive process domain to manage on behalf of North American producers. The service providers are a reallocation of the administrative and accounting resources of the producers. They are the critical change enabling much of the value proposition realized by producers from People, Ideas & Objects et al. Providing oil & gas producers with industry-based, variable administrative and accounting costs, variable based on profitable production capacity and capabilities.

If producers want to have elements of their organization included in the People, Ideas & Objects Preliminary Specification they will have to involve themselves with our user community. To attempt to define the risks, performance, responsibility and accountabilities within the parameters of a service level agreement would belittle the producer's demanding role in this development. This would also belittle their overall relationship with our user community. This is what makes the People, Ideas & Objects user community so effective. It is how People, Ideas & Objects build quality software. Our user community members are involved in development part-time. They will each generate revenues for their work as users. Their service provider organizations will be the primary source of personal value generation. People, Ideas & Objects budgeted $1.67 billion for users in the initial development phase. We expect approximately 3,000 users. These members will use their budget allocation to research, collaborate and determine the needs of producers and industry. They will communicate, oversee and ensure the software is developed in the manner necessary to ensure profitable production is produced everywhere and always. Individual users will be able to specialize in their contribution to a specific process based on the expertise individual community members provide. They're independent business people developing solutions for oil & gas, not employees of producers checking boxes off in the role of "user." Therefore comprehensive and dedicated involvement by industry and individual producers is necessary to make sure that their needs are understood and what it is they specifically require in our software and services. Ensuring that what is created on the producer's behalf is accurate. Not relegating a definition contained within a service level agreement. This is where the producer seeks to delegate responsibility and accountability to the agreement agent.

Participation is imperative for producers if they want to proceed with the Preliminary Specification developments.Developments include the decentralized production model, the Joint Operating Committee and six other Organizational Constructs, three marketplaces and fourteen modules. To achieve the most profitable means of oil & gas operations, everywhere and always. Non-participation in our user community would preclude producers from the benefits of the software, our user community and their service providers. But there's more. Non-participation would also mean that producers' particular requirements, distinctive ways of administration, accounting and operations are not accommodated or considered. That none of the software is built for the situations that the company experiences. This means that the premier asset of theirs would not have the software to handle the particular nuances of how it needs to make money. Producer officers and directors will say they have all of this covered under their current administration. And we all know how profitable they've reported themselves to be.

There is also the fact that the producers would not participate and interact with our user community itself. I expect our user community to be dynamic and fast paced with significant iterations over the business model that uses the Joint Operating Committee etc. Non-participating producers won’t know what these changes are and what the implications are to their firm's assets. They weren't there when decisions were made. An ineffective strategy. Shareholders will be wise to these actions and wonder why their producer firms are not participating? Is profitability optimization not an issue? Or is the company unaware of the technical progress in the past 25 to 35 years? Investors will have many questions and producers will need to provide the answers. 

One answer might be that it's most beneficial to wait and see how things develop with People, Ideas & Objects et al. For any producer, sitting on the sidelines will be tragic. They should choose to be in or out and have their reasons for non-participation, but sitting on the fence will be the poorest choice of all. When our user community iterates on the model after the first phase of development, the software will be quite advanced. More advanced than the producer organization can handle or understand if it did not participate earlier. Our user community and developers will never stop iterating on the model. The ability to catch up at that point may not exist. Once integrated into the participating producers, subsequent software development will bring in updated concepts and features on top of the features previously built. Non-participating producers did not participate in, and therefore can’t understand or implement. Leaving them unable to transition. Permanently degrading their performance standards and competitiveness. Financially, in terms of the producers cost to develop the Preliminary Specification, People, Ideas & Objects believe there are no free lunches.

What People, Ideas & Objects, our user community and their service provider organizations are doing is disintermediating the oil & gas business. Putting an end to the outdated business model and culture that no longer serves its users' needs and no longer generates value for any of its stakeholders. Disintermediation is necessary and timely. No industry will be immune. We have not scheduled the commencement of our software development, however we have spent our time since the publication of the Preliminary Specification developing our user community. There are no large technical issues to resolve. I believe everything we need to build the Preliminary Specification can be done with today’s technological infrastructure. Taking it as far as to assert that we have no technical risk in the People, Ideas & Objects business. Review of Larry Ellison's keynote addresses at his Oracle conference's reflects this. Although there are no large database issues to resolve, Oracle has moved their technology forward in significant ways. This will make our work faster, smarter and better. I mention this as this technological infrastructure is enabling industry disintermediation. 

It will be a completely different oil & gas industry. One that is limited to what our users can imagine. One based on the Preliminary Specification and developed further from there. This is the opportunity we have in front of us. Our user community has the power in the three critical criteria we've documented in their licensing and founding. A vision being that they are the only ones with the ability to change the underlying Intellectual Property. They are the only people our developers concern themselves with. But let's not forget about their budget as well. Our goal is to provide oil & gas producers with the most profitable means of oil & gas operations, everywhere and always. Those are our limits. 

To say that I’m looking forward to the future would be an understatement. The issues we identified many decades ago have manifested themselves in a worthless industry. The demand for cash to support the long-term destruction of the industry continues and fewer sources of support are realized each day. Serious action is needed now. I would suggest one of the dynamic changes as a result of the shale era will be that the industry leadership will not be sourced from the engineering and earth science disciplines. But its future lies in the hands of leaders who can make the industry profitable. Oil & gas industry leadership will therefore be regenerated and exercised through our user community. This will be the means by which the industry regenerates itself, profitably, not as an out-of-control spending machine. If that appeals,people should act. Actions based on individuals working collaboratively, driven by an overall vision of real profitability such as the Preliminary Specifications are how we’ll solve this. However, remember that the losing side is the most dangerous just before collapse. Don't expose yourself to them unnecessarily.

OCI How to Join

 We prioritize and focus on members of the People, Ideas & Objects user community. They are one of our three distinct competitive advantages. Quality ERP software can only be developed when users are involved. Through an innovative user community license, our user community members gain the authority, responsibility and means to affect the necessary changes in the oil & gas business model. This will provide North American producers with the most profitable means of oil & gas operations, everywhere and always. 

Individuals interested in making the much needed changes to deal with oil & gas issues are welcome to join People, Ideas & Objects as user community members. Our users are compensated for part-time work while involved in these software developments. We are establishing permanent oil & gas ERP software development capacity & capability to accommodate the changing needs of the industry. In addition, our user community members are licensed as the principal owners of a service provider in the reorganization of the administrative and accounting resources of the oil & gas industry. Their service provider organizations will deliver the People, Ideas & Objects software and their services through our Cloud Administration & Accounting for Oil & Gas software and service we are building. The scope and scale of the Preliminary Specifications modules are well beyond what could be expected of a volunteer community. North American oil & gas producers are a $800 billion industry. Our budget supports our user community in this difficult task and will fund them through to a successful conclusion. At which time they’ll form part of a permanent ERP software development capability. It will also fund them to transition to their operational service provider organizations. 

To become a member of this community, please review the following.

Review the Preliminary Specification.

Gain a strong understanding of the differences between using the Joint Operating Committee and six other Organizational Constructs in the Preliminary Specification. The differences between this system and traditional ERP systems. How these differences are captured in the Performance Evaluation, Analytics & Statistics, Research & Capabilities, Knowledge & Learning, Operations Management, Compliance & Governance, Financial Marketplace, Resource Marketplace, Accounting Voucher, Partnership Accounting, Petroleum Lease Marketplace, Blockchain, AI and Security & Access Control modules. 

Review Oracle Cloud ERP

People, Ideas & Objects Preliminary Specification is an “addition” to Oracle Cloud ERP. Oracle's additions reflect they are deeply embedded in their offering and not application modules that sit on top of the Oracle offering. Prospective members of our user community should pay close attention to the 2022 CloudWorld Conference Oracle held in October 2022. There you’ll find the focus of Oracle’s and People, Ideas & Objects et al’s desire to engineer the generic (Oracle) and oil & gas related (People, Ideas & Objects et al) processes to deliver the ultimate value for the oil & gas industry.

To enhance our understanding of the dynamic and innovative nature we are seeking to build in oil & gas, I recommend downloading and studying Professor Giovanni Dosi's "Sources, Procedures and Microeconomic Effects of Innovation."

Sign the Copyright License. 

I own the copyright to the ideas presented in the blog, wiki, and overall software development. This Intellectual Property must be maintained and held in pristine condition for these ideas to help the industry. It must also be published for the benefit of all participants in this user community, their service provider organizations and the broader oil & gas economy. Therefore it is necessary that our user community members involved in these software developments have unencumbered access to all of these concepts to prepare derivative works. Both for software development purposes and for their own service provider organizations. The Copyright and End User License Agreement both provide this. And assign the derivative work done by each User, Developer and Project Manager etc. It will remain available for use by all other licensed users to prepare further derivative works. The fees paid to our user community members for this development work are the act of purchasing their Intellectual Property.

Members of our user community are compensated for their time and should consider this software development project a cornerstone of their service provider organization's future revenue and income. And particularly those Users that wish to establish their service provider organizations based on this software offering.

Management of copyright in this manner focuses the energies of the industry on one solution. The industry cannot have multiple software developments at the same time. The scope and scale of these developments and the critical nature of the industry's issues demand a comprehensive focus for success to be achieved. 

• Submit up to 2,500 words on how and what you could provide to this developing community. What are your business plans for yourself and your service provider? What area of focus will you be looking at to build value in the industry?

What are your experiences in oil & gas, where you believe the industry could be more innovative if it had the software to define, support and enable it? What would that software look like and how could you contribute to its making? This will begin a discussion around membership within our user community etc. These summaries will be posted in the People's wiki and enable user search and discovery of like-minded people and resources. (Once our budget is secured, until then there will be absolute confidentiality to ensure people are protected from the producer's officers and directors potential retribution.)

Disintermediation through Information Technology is the process being applied through these developments. Where structured hierarchy cannot meet market demands, more efficient organization methods must be provided to meet consumer needs. It will be through the distinct competitive advantages of our user community members and their service providers that these more efficient methods are obtained in the software and services they develop. Competitive advantages such as the application of specialization and the division of labor, automation, innovation, leadership, integration, identification of conflict and contradictions, issue identification, issue resolution, creativity, collaboration, research, ideas, design, planning, thinking, negotiating, financing, observation, reasoning and judgment. People, Ideas & Objects values the contributions our users make to increasing the value of the greater oil & gas economy. Not the contacts you have. Proving it’s a different business world than today. Please join us by submitting your information here.

OCI Executive Summary, Part V

Operations Management

Producers in oil & gas are faced with a challenging dichotomy. One in which profitable operations are the only acceptable means of production everywhere and always from this point forward. Much has been wasted in the past decades and producers' capital structures are unsupported. Damage and destruction are extensive. Only a comprehensive rebuild of the industry and its secondary industry based on the Preliminary Specification resolves existential organizational issues facing producer officers and directors. Continuation of “muddling through” does not appear to be capable of dealing with these issues or resolving the most difficult future the industry has ever faced. In addition to providing profitable oil and gas operations everywhere and always, the consumer requires reliable, secure, abundant, and affordable energy. With North American energy independence, a necessity for the 21st century. With 10 to 25 thousand man hours of equivalent manpower contained in each barrel of oil equivalent. The supply of oil and gas is essential for civilization.

We’re unable to get there with the chronically unprofitable production of the past four decades. Investors have bowed out and the only source of capital large enough to fund these capital demands is industry profitability. In other words the oil & gas business in North America must be operated as a going concern. Only the Preliminary Specification has the plan to make that happen. We have no right to pass an industry on to the next generation until we can prove we produced the resource responsibly. Which means all of it was produced profitably. Each barrel of oil equivalent should be profitable in the “real” sense from this point forward as the resource is irreplaceable and is the blood of our economy. If we lose the script now it would not be difficult to foresee foreign sources of oil & gas demanding North America to play second fiddle to China, Russia or others in terms of our supply demands? 

People, Ideas & Objects Operations Management module is designed to provide producers and Joint Operating Committees with a means to monitor and control their operations. Establishing a sound base of data and information necessary to ensure decisions and actions are conducted with precision and profitability in mind. Where the financial, operational and technical data of the producer or property are available for use. Technologies involved in the Internet of Things are deployed and operational to benefit these users. And resources are deployed based on budgets and plans generated and set through this module. The Operations Management module is the aggregation of and accumulation of the efforts undertaken in the Preliminary Specifications other 13 modules. It is presented in a format where information can be used effectively for profitable decision making.

Blockchain Module

We wrote our twelfth module to the Preliminary Specification in 2018. It is the first module that focuses on technology. All of the other modules, including the Security & Access Control module, are focused on the business of the oil & gas industry and producers, as viewed through the Joint Operating Committee. Therefore the Blockchain module provides blockchain technology to all the other modules of the Preliminary Specification. Included within the Blockchain module itself is a detailed discussion of how each module is affected by this technology. I also discuss how I anticipate it will be implemented. This will be its initial implementation. And become more robust as the years pass. I see blockchain as a must-have Information Technology that will be the base of ERP systems that industries will require. I also expect and anticipate that throughout the development of the Preliminary Specification our user community will be able to define the use of the technology in a more effective and efficient way. This is due to the relatively "recent" aspects of the technology and the rapid pace of technology development and adoption at present.

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

Understand blockchain in under 7 minutes: Don Tapscott with Lloyds Bank

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

What we are finding is that the People, Ideas & Objects approach to the oil & gas marketplace is becoming more common sense as each day passes. Our approach is to provide software and indirectly administrative and accounting services to the entire industry with one solution, or as we’ve described it, Cloud Administration & Accounting for Oil & Gas. Our approach is to mitigate the software development costs incurred today by every producer. This is to perform the same non-competitive accounting and administrative tasks as the producer across the street. These costs are replicated across the industry to develop the same capabilities at every producer. Costs and capabilities that are unshared and unshareable. These software development costs, in addition to the overhead incurred in accounting and administration, are a major detriment to the industries ability to be profitable and maintain some measure of control over their costs.

Information Technologies and their infrastructures present new challenges for producers. There are business challenges, which the Preliminary Specification addresses where administrative, accounting and Information Technology costs are escalating further for each and every producer. This is what Don Tapscott calls "the shared network state," which is appropriate, because producers cannot function as islands unto themselves in the future oil and gas industry. We had always argued that the costs of the Preliminary Specification would be lower than what the industry would incur collectively as individual producers. What we have to undertake from an industry point of view will increase our costs, however the base functionality of our applications would need to be put together and maintained by each and every producer. Industry has pushed back on our thinking here, saying the application scope and scale is too large to succeed. If that were the case, how do they propose to build the same functionality within their organization with a single producer budget? People, Ideas & Objects issues arise from the implementation of scope and scale. There may be a few producers who claim an advantage in administration, accounting, and information technology, but it doesn't make sense to claim such advantages.

Artificial Intelligence

There are those that demand we add a module to accommodate Machine Learning and Artificial Intelligence. I’m a proponent of Machine Learning as it has been applied throughout the Oracle product line to add value for their customers. People, Ideas, & Objects will benefit from those products and services as they are features of their core products such as the operating system and database. I am not enamored with Artificial Intelligence, and do not see much value being generated. However, it is early days and there will be innovations in both the technology and those that employ it here in this module. Artificial intelligence we will use focuses on ERP systems, data, and information for producers. In that sense this module will provide Security & Access Control features and functions for those that expect value. We will provide the frameworks and tools for them to grow organically. 

Thomas Siebel of C3.ai has a fascinating background. He is the founder and principal behind Siebel Systems which was sold to Oracle earlier this century for $5.8 billion. This is the foundation Oracle used to build Oracle Fusion Applications, Oracle Cloud ERP and the base of the Preliminary Specification. He states that 99% of AI initiatives fail. Using Professor Paul Romers' "Endogenous Technical Change" and what we have established as an Organizational Construct, these costs can be minimized through the People, Ideas & Objects shared infrastructure model. An initiative that Thomas Siebel started for C3.a1.

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

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

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

OCI Executive Summary, Part IV

 Analytics & Statistics and Performance Evaluation

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

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

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

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

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

Within the Preliminary Specification we have also identified that many of the data elements within the Joint Operating Committee are public in nature. Production volumes and how wells were drilled are generally released into the market soon after they’re obtained. In terms of proprietary data there is less of an issue regarding the Joint Operating Committee data. It is not to suggest that this removes the need to have the highest levels of security in all aspects of this data. This is only to demonstrate how the data within these two organizations is fundamentally different from one another. Producers possess a number of unique characteristics, considered proprietary technologies and understandings that make them unique. The value discussed within the Preliminary Specification of the treatment of data and access builds significant value for all concerned. Participation is necessary in the industry. The issues and opportunities are not resolved here and won’t be resolved until our user community studies and determines how it is handled. Today’s existing producers, should they survive their own self-inflicted destruction, may want to express their concerns and also participate in our user community to ensure that their concerns are considered.

Work in the 21st century will be different. People need different tools. The Performance Evaluation and Analytics & Statistics modules are the beginning of these next-generation era tools for people's work. We often discuss specialization and the division of labor in the Preliminary Specification. There is also specialization and division of labor between what people and computers will do and that is reflected here in these two modules. Computers will be responsible for storage and processing. People will be responsible for leadership, problem solving, issue identification, research, thinking, ideas, design, planning, decisions, creating, negotiating, compromising, collaborating, innovation and many other things we do well. Much of these things are generated based on facts that will be determined through the Performance Evaluation and Analytics & Statistics modules.

Compliance & Governance

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

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

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

As indicated earlier regarding our user communities' determination of the People, Ideas & Objects application scope. Part of that scope determination will include which regulations and jurisdictions it must comply with. With so many jurisdictions requiring compliance, each transaction may need to be assured of compliance with multiple jurisdictions. Add to that, the transaction may be generated through a Joint Operating Committee owned by a variety of producers. And those producers may have an international background and the Compliance & Governance module gains importance.

From the point of view of a producer, maintaining the database and applications for all of the compliance frameworks they need to concern themselves with is difficult. The number of people needed to keep applications up to date is significant. However, with People, Ideas & Objects, as one software developer acting on behalf of the industry as a whole, the job becomes much more specialized and manageable. Then again if we were building these applications to serve an industry we would use the division of labor and specialization to manage these tasks in a way that would significantly lower the costs of compliance, and increase the quality of the producers' compliance. Sharing the non-rival costs of building and maintaining the infrastructure of our Cloud Administration & Accounting for Oil & Gas software and service.

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

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

Industrial Command & Control

Throughout the Preliminary Specification we've discussed our solution to one of the premier issues the oil & gas industry faces. That is, the demand for earth science and engineering effort per barrel of oil increases with each barrel produced. This is best represented by the steep escalation of oil & gas exploration and production costs. Meanwhile, the critical earth science and engineering resources are relatively fixed and difficult to expand. Add to that the anticipated retirement over the next twenty years of the current brain trust of the industry and the problem becomes a critical concern.

For the time being, there are few short-term solutions to the status quo volume of geologists and engineers. It takes the better part of that time to train them to operate effectively in the industry. Our resolution in the People, Ideas & Objects software applications modules involves what we’ve developed and called “Industrial Command & Control” (ICC) and the application of specialization and division of labor. Specialization and the division of labor are well known economic principles that bring about greater economic productivity from the same volume of resources. Given that the volume of earth science and engineering resources is known for the foreseeable future, specialization and the division of labor will provide us with a tangible means to potentially increase the capability, capacity and productivity of the oil & gas industry, yielding multiples of today’s performance over the long term. With software defining and supporting organizations, today’s producers must approach a heightened level of specialization and division of labor through software in broadly dispersed North American markets.

People, Ideas & Objects ICC involves the implementation of specialization and the division of labor in the disciplines of geology and engineering. As of now, each producer firm must acquire all Earth Science and Engineering capabilities to meet the needs of its "operated" properties. Which creates capacities and capabilities for these scarce resources that are deployed “just-in-time” within the producer firm designated operator. When each producer within the industry pursues this same strategy, inefficiencies in these critical resources result. Leaving resource utilization rates lower due to the volume of unused and unusable resources locked in each producer firm. 

What is proposed through the People, Ideas & Objects software application modules ICC is that the producer's operational strategy avoids the “operator” concept. Instead, it begins “pooling” these technical resources through each of their partnerships represented in their Joint Operating Committees. That way the inefficiencies that would have been present in the industry can be made available and used through industry wide, producer focused, advanced and advancing specialization and division of labor. Where many of the lower end processes are offloaded to service providers who specialize in that basic skill on behalf of many producers. This is done in a geographical area or other specialization. And each individual producer focuses on a specialized element of science as it develops and innovates upon that. People, Ideas & Objects believe producers will soon be unable to commercially support the full scale of engineering and earth science disciplines tasks and responsibilities as they have in house. This will be due to the shortages of resources, the cost escalation of these resources in the market due to their shortages, the expansion of demand from higher production volumes, the demands for more science in each incremental barrel of oil produced, the anticipated, substantial expansion of the sciences and the need to innovate upon that expanding science.

What these concepts demand is what the Security & Access Control module is designed to provide through the ICC. The People, Ideas & Objects system must provide access to the right person at the right time at the right place. This is with the right authority and the right information and on the right device. With the ICC there will also be a manner in which the technical and all the resources pooled from the producers, interact with the appropriate governance, compliance and industry standard chain of command.

Before the hierarchy which was a commercial development of the 20th century, there was only the military structure in terms of large organizations. The main difference between the two is subtle but significant. Military structures are broader and flatter than hierarchy. That is one of the ideals we are seeking, but the more relevant feature is the ability for the chain of command to span multiple internal and external organizational structures and to move resources from different areas of the military through standardization.

The nature of the people interacting through the industry standard chain of command layered over the Joint Operating Committee will include all of the disciplines involved in oil & gas. The contributions of staff, financial and technical resources will include all those employed by the industry today. I could see many office buildings being refurbished to accommodate a single JOC on a large property. Staff from the different producers may be seconded to work for one or more JOC, not at any particular producer firm.

As background we should recall that each individual would have different access levels and authorizations in terms of access to People, Ideas & Objects ERP systems. Assuming different roles and responsibilities, they would impose different access levels to data, information, processes and functionality. Additionally, Security & Access Control is the key module to implement Industrial Command & Control across People, Ideas & Objects software modules. This structure, particularly in a Joint Operating Committee, would weave multiple producer firms under one industry standard chain of command. In addition, it would include an interface to ensure that all processes were "manned" to ensure compliance, governance and overall completeness.

OCI Executive Summary, Part III

 Partnership Accounting 

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

• Knowing which properties are not profitable and shutting those in. 
• Applying their efforts and innovations towards returning their inventory of shut-in properties back to profitable production. 
• Losses on properties will no longer dilute corporate earnings. 
• Reserves are kept until they can be produced profitably. 
• Reserves costs do not have to carry additional losses if the property continues to produce at a loss. 
• The cost of surplus production and storage decreases when the commodity is kept as reserves. 
• Commodity markets find a marginal price when unprofitable production is removed. 
• All the information in the commodity market, the inventory, production, demand and reserves is captured and presented to the producer in the commodities market price.
• Marginal prices earned for all properties across North America. Therefore maximizing corporate profits through production discipline. 
• Which provides the adequate financial resources to fund the replacement value of all profitable production. 
• This provides producers with the financial resources to satisfy their investors, bankers and capital expenditure programs. Running a profitable business will provide all the financial resources officers & directors could ever want or need.

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

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

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

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

Accounting Voucher

We now focus on the Accounting Voucher module. The interactions between the Accounting Voucher and the Partnership Accounting modules of the Preliminary Specification are naturally quite significant. Accounting modules naturally have high integration levels. The Accounting Voucher is unique in that it provides the producer with the ability to design transactions and the Material Balance Report. These are not innovations producers will use to become more innovative. Instead, they are intended to ensure that innovative producer processes are actively defined and supported throughout the People, Ideas & Objects application modules. As a science-based business, oil & gas producers need to remain open and flexible in their approach to both science and business. Accounting Voucher and Partnership Accounting modules provide that organizational flexibility. The Accounting Voucher captures transactions. Partnership Accounting reports on transactions. Accounting Vouchers remain open for one accounting period and are subject to the same closing process familiar and traditional in accounting. A Joint Operating Committee will have many Accounting Vouchers each month. Examples include both Material Balance Reports and  Work Orders. The Material Balance Report and others will also form templates for subsequent months with persistent memory of the prior months' fixed variables.

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

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

As a result of the pooling concept, which is a basic assumption developed for the People, Ideas & Objects Preliminary Specification. Some Accounting Vouchers will be open to charges from multiple producers represented on the Joint Operating Committees that a producer firm participates in. The revenue, capital and operations of each of the Joint Operating Committee accounts are open to the direct debit and credit charges of all of the authorized participants in the Joint Operating Committee. 

The pooling concept has been developed as a replacement for the "Operator" designation that currently exists. This is a necessity as a result of the ability for each producer, as a properties designated operator, to have the just-in-time capabilities available for all the properties they operate, demand that they have surplus capacity, or as we describe them as unused and unusable earth science and engineering capabilities and capacity. The ability to pool these critical resources from participating producers of the Joint Operating Committee enables each producer to use specialization and the division of labor to expand the industries capabilities and throughput capacity and releases these hoarded unused and unusable capabilities. This pooling concept also implies that producers will provide resources to the property in disproportionate amounts to their working interests. Any over or under participation equalized monthly. 

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

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

Research & Capabilities

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

There are a variety of interfaces in the Research & Capabilities module that enable and encourage innovation, and develop the producer firm's capabilities. These capabilities are ultimately captured in the “Dynamic Capabilities Interface” which is the key to both the Research & Capabilities and Knowledge & Learning modules. What the “Dynamic Capabilities Interface” captures, documents and enables the deployment of producer firm capabilities. These are the firm's knowledge, skills, experience and ideas. These capabilities are deployed or tagged according to their pertinent geological zone, geographical area, etc. And as a result these capabilities will be populated into the various Joint Operating Committees that meet that criteria in the Knowledge & Learning module. Each producer within the Joint Operating Committee will populate the Knowledge & Learning module in this manner. It is pertinent to note that the information documented is explicit or implicit knowledge developed regarding that producer's capabilities and innovations. The tacit knowledge is the capabilities and capacities inherent in the contributing producers' competitive advantages. 

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

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

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

Please note the proprietary information contained within these modules is copyrightable and the process of putting them within the Research & Capabilities module is an act of publication. The Research & Capabilities module is technically implemented using blockchain technology. In this way, the control of the information can be managed. Any additions or deletions to the information will be aggregated in the interface by reading subsequent blocks in the chain that amend the information. 

Knowledge & Learning

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

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

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

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

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

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

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

There is much to be done in the oil & gas industry and much of it involves blazing trails. People will need to work hard. The challenges and opportunities are of historical significance and will require dedication from many people.

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

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

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

OCI Executive Summary, Part II

 Security & Access Control

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

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

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

Pooling is our solution to the current requirement that every producer firm acquire earth science and engineering capabilities to deal with their operated properties. This creates unneeded "just-in-time" capacities and capabilities for scarce scientific resources. When each producer pursues this same strategy, substantial surplus capacity is built into their overall capabilities creating industry-wide unshared and unshareable resources. Redundancies built within each producer firm are otherwise inaccessible, unused and unusable. What is proposed through the People, Ideas & Objects Preliminary Specification is that the producer's operational strategy avoids and eliminates the operator concept. Instead, it pools their technical resources through the partnership represented in each Joint Operating Committee. That way the surplus capacity of otherwise unused and unusable technical resources in the industry can be made available to the Joint Operating Committees. Producers can employ these resources through their firms' advanced organizational specializations and divisions of labor.

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

Resource Marketplace

What we set out to accomplish in the Resource Marketplace module is captured in this quotation from one of our primary research sources. Professors Richard N. Langlois and Giovanni Dosi, as well as many others,' research was used in the development of the Preliminary Specification. In this quote from Professor Langlois from "Capabilities and Governance: The Rebirth of Production in the Theory of Economic Organization."we learn about the direction we're headed in.

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

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

Similar interfaces will be provided for service industries. Since transactions involve two parties, the producer's efficiency naturally includes the efficiency of the service provider. Since we are an accounting system, providing similar services to suppliers makes sense. It is not just producers in the Resource Marketplace. Key to Resource Marketplace efficiencies are the mitigation of transaction cost friction. Friction on both sides of the transaction. This is due to the fact that transaction costs in the Resource Marketplace will ultimately be borne initially by the Joint Operating Committee and eventually by the producer itself.

Contained within this marketplace will be all of the producers and suppliers who will be able to define, create and conduct business in the actual marketplace that exists today. The scope and size of the Resource Marketplace, our user community and their service provider organizations will accommodate Exxonmobil's needs and the single entrepreneur starting out in the oil & gas business. To exclude any group, profession, organization, or person from the Resource Marketplace would limit the industry's value. Whatever service, product or solution is provided to the energy industry, from individuals, those employed by producers or Joint Operating Committees, or companies providing services to the producers. This should include SLB and anyone directly or indirectly employed in the energy industry. Accordingly, we must acquire "the elements of organization, knowledge, experience, and skills" as Langlois suggests. To which we would add "ideas."

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

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

It is here that we find the reason for what plagues the North American oil & gas economy. Producers have chosen centralization as their theme to deal with the situation they’ve created. Issues remain unaddressed and solutions remain limited to People, Ideas & Objects et al. As of 2023 similar approaches have been successfully implemented in many other industries through the form of disintermediation or decentralized organizational business models and structures facilitated through the use of Information Technologies and most specifically the Internet. Producing firms are now suffering from issues that have resulted in diminished capabilities and capacities throughout the service sector. An industry established exclusively to provide producers with geographical and technical diversity. To the point where the service industry capital structure is non-existent due to the destruction caused by producer firms. At the same time, producers are facing oil & gas production deliverability volumes that haven’t been maintained over the past seven years. These volumes may collapse due to neglect and incapacity. 

Petroleum Lease Marketplace

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

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

It should be noted that much of today's unintegrated ERP systems approach seeks to independently source and replicate these processes repeatedly through independent and disparate systems. This is true for all producers. What effect would theories such as Professor Paul Romer's Endogenous Technical Change and its non-rival or shared approach such as People, Ideas & Objects Preliminary Specification provide industry? Where the original source of the data will be acquired, authenticated, maintained and used once, not only internally throughout the producer firms but also within the specific properties data being shared externally through their partnership as represented in the various Joint Operating Committees? 

One of the greatest opportunities in developing this system is to address the division of labor and specialization. To take people’s work and reorganize it across the industry. This is to focus on the needs of the producer and the Joint Operating Committee. It is specialized in the tasks they perform. Applying those skills across the entire industry, a geographical region, or another classification. Which is something that would provide significant increases in oil & gas industry productivity, cost savings and value. That is to say that a user community service provider organization would be responsible for an individual process billed to 1,000 Joint Operating Committees. This process might represent 100 oil & gas producers within a specific region that focuses on Shale and is geographically constrained. 

Expansion and productivity are increased through specialization and the division of labor by identifying and filling gaps. However, the natural process of gap filling in today’s business environment is constrained due to the strict and unchanging structures imposed by today’s ERP systems. To make changes, producers will need the software development capabilities, our user community and service providers who provide our Cloud Administration & Accounting for Oil & Gas. This will enable them to make the changes in the software first, then the changes in the organization can follow. 

In this process we are moving towards an enhanced level of competitive advantages for our user community and their service providers. These include leadership, issue identification, problem solving, decision making, creativity, collaboration, research, ideas, design, planning, thinking, negotiating, compromise, innovations, finance, observation, reasoning, judgment and identification of conflict and contradictions. Service providers are employed to deliver explicit knowledge captured in the People, Ideas & Objects software. This is supported by their tacit knowledge of how to do the administrative or accounting work. Please note we will defer data storage and processing to computers. 

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

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

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

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

Innovative oil and gas producers have their land & asset base, as well as engineering & earth science capabilities as competitive advantages. A Petroleum Lease Marketplace module provides producers and Joint Operating Committees with the tools they need to manage their land & assets. But there’s more. Using our Marketplace Interface and our user communities service providers that support innovative producers and Joint Operating Committees. The Petroleum Lease Marketplace provides profitable and innovative producers with the competitive advantages necessary to compete in the 21st century.

Financial Marketplace

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

Issues as a result of the financial crisis of 2008, the destruction of natural gas prices in 2010, the beginning of oil price destruction in 2014, the oil & gas investors strike that continues since 2015 and 2022s realization that industry wide field capacities and capabilities are diminished and degraded. The demand for capital in a capital intensive industry will continue to be strong, and as a result of this history its supply will continue to be tight. There has been a serious cash and working capital crisis in the industry due to the officers and directors method of management. Making the situation the producers face untenable and most likely to lead to further wholesale destruction for all involved. The future also requires that we can provide for energy market demands, which requires even more capital than before. This therefore demands that changes in capital structures will be necessary to improve the overall performance of the producer and the Joint Operating Committees they participate in. Strategically muddling through just seems too risky. 

Therefore creating a physical financial marketplace based on profitability, performance and capital throughput is necessary to realize this future. And profitability today, every day and everywhere throughout the industry. Oil & gas is a mature industry. Expectations that “building balance sheets,” whatever that means, must shift to real, tangible and actual profitability. It is estimated that energy capital demands over the next 25 years will require investments of $20 to $40 trillion. According to today's producers, they assume that investors and bankers will continue to provide those resources in the future. This being a continuation of their currently employed business model that capitalizes every possible cost down to the receptionists Post-it-Notes, phone service and their time which subsequently recognizes these costs over several decades. The producers' current business model and assumptions of it continuing are unreasonable. 

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

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

A note about our Marketplace Interface which is a critical component of the Resource, Petroleum Lease and Financial Marketplace modules. The Marketplace Interface is a virtual representation of each marketplace module. It uses avatars where firms and producers create virtual representations of their offerings. This provides a means for people to conduct their business virtually compared to traditional means. These avatars will be supported through the People, Ideas & Objects ERP system. This provides them with the ability to conduct any and all operations that they can conduct in any of these Preliminary Specification modules. It should be seen as the ultimate collaborative interface.