And Just Like That, Everything Changes, Again

Oracle CloudWorld 2023

Generative Artificial Intelligence was the technological theme of the Oracle CloudWorld 2023 conference. Oracle has now entrenched their entire product line into these tools with Larry Ellison stating “Generative AI is transformational.” North American producers need to be careful not to become the technically illiterate, second cousin of the S&P 500. What we see in Oracle's examples throughout the conference is. Generative AI is a productivity tool that enhances automation and supports the user with their dynamic needs of how to employ their systems efficiently. Wikipedia defines Generative AI.

Generative artificial intelligence is artificial intelligence capable of generating text, images, or other media, using generative models. Generative AI models learn the patterns and structure of their input training data and then generate new data that has similar characteristics. Wikipedia

In terms of the Oracle CloudWorld 2023 conference, I see the introduction of Generative AI into Oracle Cloud ERP to be of similar significance to last year's conference. Hence the title of this post. Taking advanced automation introduced at Oracle CloudWorld 2022 and building upon that with Generative AI. Which I see as providing the capability for users to implement and deploy automation as needed based on users' needs and input. The reduction of low-level work that consumes endless hours of today's time. Journal preparation, account reconciliation, management and financial reporting narratives. However, it's more than that. It includes a series of dependent tasks executed in serial and parallel methods that are generated dynamically based on user input. 

Another example of Oracle’s use of these technologies is their application of Machine Learning in the development of Oracle's Autonomous Database. A fully automated database that learns from itself what it needs to manage itself. It requires substantially less Database Administrators and relieves these resources to pursue higher value work loads. There are Generative AI frameworks as that is the most apt analogy for me. These frameworks are prepared in all disciplines by independent companies across the United States. These include the legal and medical disciplines. Adoption of one of these will introduce the framework's training data and when applied, will enhance the understanding of the individual Oracle Cloud ERP data and information. Clay Magouyrk keynote presentation demonstrated the benefits of such frameworks training on data in an ERP context. His video is highlighted below and the section noted is between 53 and 59 minutes.

Applying this to an oil & gas scenario. I would see members of a Joint Operating Committee engaged with their property resolving issues and opportunities. Individuals not involved in accounting and administrative disciplines. Based on the systems and data that have been prepared, they will be able to ensure the data they use is compliant and meets the needs of all stakeholders. Making sense of accounting information by asking natural language questions and then formulating new questions based on the output. Using that data to make decisions based on reliable, actual and factual accounting information.

People, Ideas & Objects provides a vision that encourages a dynamic, innovative, accountable and profitable oil & gas producer. This is to achieve the most profitable means of oil & gas operations. Accounting and administration are not competitive advantages for North American producers. But what should be clear is that the environment described in Oracle CloudWorld 2023 and in our Preliminary Specification does not provide oil & gas producers with a competitive advantage. However, a producer that is unable to function in a technological environment such as what is detailed in these offerings will have obtained a distinct competitive disadvantage.

These keynote presentations may be of interest. I highly recommend them to anyone interested in People, Ideas & Objects. 

Oracle’s vision for the future - Larry Ellison Keynote

Putting customer success at the heart of everything - Safra Catz Keynote

Building the cloud's intelligent future - Clay Magouyrk Keynote

Achieving lasting success with Oracle Fusion Applications - Steve Miranda Keynote

I thought I would share some of my thoughts on how Oracle continues to push the boundaries of ERP systems. What I am consistently surprised by is the pursuit of very similar objectives and features of both Oracle and the People, Ideas & Objects products. For example, one of the presenters noted that Generative AI training eliminated the need for each firm to employ these costs independently. This is Professor Paul Romer's New Growth Theory, or the sharing of non-rival costs, which is one of the seven Organizational Constructs of our Preliminary Specification. Another similarity is the marriage of their Analytics applications with Generative AI. 

Generative AI, Machine Learning and all of these facilities are a complete waste of time and energy if an oil & gas producer's data and information remains in the state it currently resides in. Without organizing ERP related data and information, none of these technologies are useful. These are part of the work done through our initiatives to organize, standardize and ensure objective data and information is generated and used across North America. The amount of work to organize this data, gain an understanding throughout the industry, and build ERP systems that capture, process, manage and present the data is far more extensive than what one producer firm can handle. If a producer attempted to do so it would be questionable if they could finish. In the case of one individual producer, the value of this process is minimal and it is unknown if they would still be in business after such an experience. This is an area where the sharing of these non-rival software development costs across the industry, as proposed by People, Ideas & Objects, will make the required time and cost incidental to each producer. In contrast, the benefits will provide reliable, understandable results for the user. It is as Larry Ellison stated in his keynote address that standardization is necessary for automation. Automation is necessary for Generative AI. None of this is viable or available without reliable, organized data and an understanding of what that data is. To begin this journey as a lone producer would be futile.

It was during Oracle CloudWorld 2022 that the theme of high levels of automation became a significant change in the way business conducts business. The two alternatives were battalions of green shaded and pocket protected people asking “what” as they squinted back at their questioner. Or, we could use these technologies. The J.P. Morgan Chase credit card example I cited from last year's keynote has now been adopted by both HSBC and Mastercard. These developments are generic business automations distributed to all of Oracle's global customers in all industries. We should expect further development of this type of automation in Oracle Cloud ERP. People, Ideas & Objects implement similar features for North American oil & gas producers. In Oracle Cloud ERP, we offer oil & gas "additions" on top of these Oracle business features.

Producers that continue without data and information organized, presented and understood will find their business environment costly and difficult. Accelerating business speed will accelerate confusion and misunderstanding. Automation reduces costs through human error reduction. If the data is unknown, confused but automated, what will it provide? Production data sourced from field data captured through the Internet of Things (IoT) will reduce costs. If we have a fully reconciled volumetric balance as the People, Ideas & Objects Material Balance Report proposes, and the automations from that data as proposed. Applying the scenario of what Generative AI might provide a Joint Operating Committee through a balanced and reconciled Material Balance Report may show new perspectives on this data. And in an environment where only profitable production is produced. Producers having all of their production in a system wide Material Balance Report might identify opportunities to save costs, increase production or build value.

However in this situation without the data managed appropriately, the Joint Operating Committee as the key Organizational Construct throughout the oil & gas and service industries will only lead to further confusion and accelerate issues on a logarithmic scale. To state that we’re not there yet is obvious. That however is where Oracle is today and People, Ideas & Objects are with their Preliminary Specification vision and business model. We have focused and expressed concern regarding the poor quality of the oil & gas administrative and accounting data. Data is where this journey must begin. 

The effect this will have on our service providers is substantial. They will be in the middle of the hurricane in terms of data, process, management and control of the producer's administrative and accounting software and services. Their service and support must be there. They’ll also be equipped with the tools to accommodate changes through their owner and operator. This being one of our user community members. 

SAP

These comments regarding SAP are a result of the SAP for Oil, Gas and Energy conference held in Dallas between September 13 - 15, 2023. A conference that I did not attend, and these are the comments of Carolyn Dolezal who is the Chief Operating Officer of ASUG, SAP’s user community. The conference focused on industry issues, however Carolyn listed only digital transformation, data analytics, and sustainability topics. A strong technological focus that meets ESG requirements. And noted SAP oil & gas leadership that made keynote presentations at the conference and the scattershot discussion of what energy needed. From how to invest in renewables, or “how to assess the near-term and long-term benefits of significant competing priorities?” The last paragraph noted SAP leadership even mentioned “value” and “profitability” at one point. A marked improvement on prior company talking points. 

What was evident, however, was that with all the great minds there was no vision or plan for what to do. How will they make money and build value for oil & gas producers? This is nothing more than a reflection of the oil & gas industry itself. No one can or will do anything about anything and as a result there is nothing to be done by anyone. Do what you can and make it look good. I’m not seeing the sense of urgency or the focus on what should concern those at the SAP conference.

As many producers have taken SAP as the first step in implementing Tier 1 ERP solutions. It is a technical solution to an unidentified existential issue. I would suggest that the process of implementing SAP is being undertaken at the behest of producers' investors who demand Tier 1 ERP systems. We would note that the oil & gas industry's existential issue is officers and directors' inability to accept appropriate profitability and accountability criteria. People, Ideas & Objects' focus throughout this period has been to use the Joint Operating Committee as one of seven Organizational Constructs to enhance “real” producer profitability. A vision we began with in August 2004, and even more valid today. I don’t think there could be two choices with more distance between them. 

OCI Operations Management, Part I

 Operations Management

I am pleased to present the 14th module of our Preliminary Specification. Operations Management should be seen as an entirely different module from the Preliminary Specification. Other modules enable producers to capture, analyze, and report on their data, gain insight from them, and make informed decisions. The Operations Management module enables producers to actively engage with their producer and Joint Operating Committee organizations. To conduct their operations based on the decisions they make, the strategies they employ, and the unique competitive advantages that come from their land & assets. As well as coordinating the markets' earth science and engineering capabilities. 

The Operations Management module is at the crossroads between two separate and distinct operations and corporate groups that have developed over the past decades in oil & gas. These two groups work at opposite ends of the producer firm where the corporate silo is interested in the SEC, regulatory and tax requirements. They have not fulfilled their role in providing valuable operations information on an overall producer basis or to each Joint Operating Committee. Operations and technical environments have sought to mitigate the lack of business knowledge, understanding and information passed into operations. This in many ways has created the broad industry issues that have manifested themselves. 

We're rebuilding the oil & gas industry through the development of Preliminary Specification and Cloud Administration & Accounting for Oil & Gas. End-to-end planning, implementation, and optimization of the exploration and production process need to be undertaken and implemented. That will be done through the producer and Joint Operating Committee in this Operation Management module. This module more than any other is a producer-facing module. The key difference between what may exist today is that the Preliminary Specification will be populated with actual, factual accounting and administrative data and information. Not recycle costs or other estimates from reserve reports or elsewhere. We’re replacing what exists today in the industry and producer firms. Replacement of what has been done is necessary to rebuild industry culture towards profitability and performance.

Preamble

How does the producer firm focus on innovatively producing profitable oil & gas? The Preliminary Specification relieves them of their non-competitive tasks of administration and accounting. Supported by our user community and their service provider organizations, producers will no longer need to build and maintain their unshared and unshareable capacities and capabilities to meet the requirements of those aspects of their business. Engineering, geology and business operations in terms of exploration and development are their domains of expertise. Based on their ability to deploy their distinct competitive advantages of their land & asset base and to coordinate the markets earth science & engineering capacities and capabilities. 

North American oil & gas producers are in a state of organizational collapse which is catastrophic for all concerned. With internal and field capacities and capabilities that are severely deprecated, producers are incapable of maintaining their activity levels, assets and productive deliverability for the mid to long term. Their capital structures are and have been unsupported for almost a decade. The amplification of the accelerated shale decline curve has placed the North American economy and society in a situation where the status quo is proving incapable of even recognizing their difficulties. Leaving what will become a long term consequence of their inaction to be detrimental to the most powerful economy ever known to man when it's dependent on foreign sources of oil & gas. The opportunity to mitigate this is through the active disintermediation and rebuilding of the industry by way of the development of the Preliminary Specification. This is done by our user community, their service provider in People, Ideas & Objects Cloud Administration & Accounting for Oil & Gas software and service.

2023s natural gas price shows the one thing producers assured us they controlled. Production discipline doesn’t and has never existed under their current culture of “muddle through.” To them, producing unprofitable production is considered a right and a privilege. As a result, producers cannot determine whether a property is profitable. Their ERP systems are not structured to capture property data, especially the detail involved in overhead and depletion. Capital costs are intended to build balance sheets, not pass these capital costs onto consumers. The issue that People, Ideas & Objects Preliminary Specification is designed to resolve, is chronic, systemic overproduction of oil & gas since July 1986. Despite natural gas becoming a weapon of war and shale decline curves appearing in all basins, this anomaly of overproduction by the North American natural gas producers continues.

People, Ideas & Objects propose the vision of the Preliminary Specification and its 14 modules built upon Oracle Cloud ERP. Designed, developed, supported and serviced for the long term through our user community and service provider organizations. A rebuilt industry that provides the most profitable means of oil & gas operations, everywhere and always. Profitable operations are the only source and means of capital that is large enough to satisfy the demands of what oil & gas will require throughout the greater oil & gas economy up to the year 2050. What we know and understand of the current administration's is that when pressed, they never listen or act. They'll say anything to satisfy the present concern, do absolutely nothing, eventually regressing back to their cultural norm. Which is consistent with and part of their dedicated "muddle through" strategy.

Review of this Operations Management module will leave most people thinking that the scope and scale of the application is well beyond what's possible or practical. I would certainly understand that commentary and ask you to view this differently. It is the 21st century and we are building applications for the issues that plague the industry today, the next generation and the future. I see the Operations Management Module using the Preliminary Specification and leveraging it in ways that are the basis of the type of innovation that Oracle, People, Ideas & Objects, our user community and their service providers will be able to conduct with producers and Joint Operating Committees in the future. We are leveraging this opportunity to integrate a monitoring and control system for producers to manage their Joint Operating Committees. This will enable them to be the dynamic, innovative, accountable and profitable properties and producers they’ll need to be. 

The perspective that I see in these types of applications delivery, such as our Operations Management module provides to the producers. Will no longer contain a box of diskettes, digitized manuals available on the world wide web and supported through a help desk Monday’s to Friday’s from 8 - 5. It’s not from the early 1990s, and is worthless today. This is one of the reasons we've focused on our user community as our key competitive advantage and their service provider organizations. They’ll need to be available 7/24 supporting the Preliminary Specification, ensuring they’re operational and troubleshooting issues prior to any producer calling or discovering the issue. Capable of resolving difficulties in industry operational, technical, administrative or accounting domains. 

People, Ideas & Objects find today's producer expectations of our ERP competitors surreal. Paying for nothing, expecting miracles, casting aspersions when Service Level Agreement (SLA) expectations are not achieved. In addition, there is no producer participation beyond SLA execution. My expectations of our user community are for it to lead the development of new business models within the industry. I also expect it to provide the value proposition that the Cloud Administration & Accounting for Oil & Gas software and service is designed to deliver. The user community is taking proactive steps to address the issues and opportunities facing the industry. This is to ensure they’re providing North American dynamic, innovative, accountable and profitable oil & gas producers with the most profitable means of oil & gas operations. This role has been capitulated by producers through their culturally systemic “muddle through” strategy and must be undertaken.

We see this as the future of enterprise software. Business' dynamic nature can't be managed through a generic configuration conceived decades ago and not amended. Software to manage the enterprise alone is an inherently dangerous assumption. Nothing of complexity, substance or significance works in that way. People, Ideas & Objects is a comprehensive software and service offering that is a permanent capability of North American producers. This is the level at which the software industry has reached. It is the promise it has always had. Officers and directors assume it will be available by flipping a switch. Conversely this does not imply that producers will continue to define the terms of what they expect in a Service Level Agreement. They will sit back and criticize any deficiencies. It is too late to settle for old failed processes in a world where software dominates the workplace. It’s no longer enough to just own the oil & gas asset, it’s also necessary to have access to the ERP software and services of People, Ideas & Objects et al’s Cloud Administration & Accounting for Oil & Gas, which makes the oil & gas assets profitable. This must be an all hands on deck commitment by all for success to be achieved. That is Oracle Cloud ERP, People, Ideas & Objects, our user community, and their service provider organizations. This is for development, implementation, service and support of the Preliminary Specification. Dynamic, innovative, accountable and profitable producers and the service industry will all need to participate actively.

With the Preliminary Specification we are seeking a transformation in the profitability, performance and culture of the producer organization and Joint Operating Committees as we’ve detailed throughout. These will need to undergo a transformation that is far more radical than what the status quo culture can comprehend. How this transformation will happen will be through their efforts in this Operations Management module. Through this process, they will be able to reduce their process and activity timelines, as well as raise their performance criteria and expectations consistently throughout the century. Tighten up the interactions between the tier 2 and 3 sub-industries to optimize the producers and Joint Operating Committees production and exploration processes. An industry-wide rebuilding process that will need to be and can only be conducted and funded through oil & gas production profitability. Where producers can compete effectively on North American capital markets. They will also maintain affordable, reliable, abundant and secure domestic sources of oil & gas for consumers. 

People, Ideas & Objects

We are Enterprise Resource Planning software developers for oil & gas. Our competitive advantages include our user community, Intellectual Property and research. Delivered through our Cloud Administration & Accounting for Oil & Gas software and services. It’s no longer adequate to just own the oil & gas asset, it’s also necessary to have access to the ERP software and services of People, Ideas & Objects et al’s Cloud Administration & Accounting for Oil & Gas that makes the oil & gas asset profitable. 

Our user community

Our focus and priorities are on the People, Ideas & Objects user community. We have established our user community with a comprehensive vision. This ensures that they can make the changes that provide for the most profitable means of oil & gas operations, everywhere and always. Three significant attributes of their structure provide them with the means to do so. 

Only user community members are licensed to make changes and prepare derivative works to the underlying Intellectual Property of the Preliminary Specification. 

Our developers are licensed to take instruction and input only from our user community. They are deaf, dumb and blind to all others. Producers can discuss their issues and potential opportunities directly with our user community members. 

Our user community controls their own budget.

The method and means of communication that producers, Joint Operating Committees and service industry representatives will use to engage our user community will be through this Operations Management module. This communication and collaboration portal will simply be a representation of a stand alone, dedicated, collaborative module established throughout the Preliminary Specification. This module will enable enhanced and focused communications.

Service provider

Each user community member is licensed to establish one or participate in the ownership and operation of many service provider organizations. Service providers enable the change People, Ideas & Objects et al make to oil & gas producers' cost structure. Moving from fixed, producer-based, overhead, accounting and administrative capacity and capabilities. To variable, industry-based, overhead, accounting and administrative capacity and capabilities. Variable dependent on profitable production. Service providers are independent organizations owned and operated by our user community members that manage an individual process operation within the Preliminary Specification. Applying their services and competitive advantages in the form of quality, specialization and the division of labor, automation, innovation, leadership, integration, deployment of their tacit knowledge, issue identification and resolution, creativity, research, ideas, design, planning, thinking, financing, observing, judgment, reasoning, conflict and contradictions, collaboration and compromise.

Using these unique skills and industry understanding to apply their process across the industry data set. Populated through a reallocation of the producers current accounting and administrative resources these people will be the ones that deliver the software and services of Cloud Administration & Accounting for Oil & Gas to North American based producers and those they interact and transact with. 

As with our user community, service providers will use the Operations Management module as a portal for communication between themselves and the larger oil & gas community. Collaborating on issues and opportunities of concern and information pertinent to the various stakeholders identified in this module. Communications for enhanced software and services development, integration, issues and opportunities.

Oracle

People, Ideas & Objects have selected Oracle as the base Information Technology provider for the Preliminary Specification. Using Oracle Cloud ERP as the foundation, with all of their underlying technologies, which hold the premier spot among enterprise technology providers. Oracle recently began moving towards heavily automating processes to build substantial value for organizations throughout the business world. Partnering with J.P. Morgan Chase to employ their credit card to record corporate expenses during expense reporting processes. When an employee uses this credit card they can designate the charges destination and Oracle will process it to ensure it fits within the companies eligibility policies. The individual will not have to spend hours filling out expense reports. Others won’t need to review them and charges will be paid appropriately. Eliminating the many thousands of hours consumed in expense reporting annually to a few milliseconds of processor time. Additional process automations are being undertaken for logistics with providers in those industries, for example. 

These automations will be comprehensive in nature and will build upon themselves as users realize the combinations and permutations of the various processes and how they’re related. The value earned by those firms that move to this architecture and organize themselves in this manner will reap substantial rewards in performance, productivity and profitability.

This is the same undertaking that People, Ideas & Objects, our user community and their service provider organizations are conducting with the development and implementation of the Preliminary Specification. The difference between what we propose in the Preliminary Specification and what Oracle does is that they provide generic business processes. We tackle North American producers' specific oil & gas attributes. Having the full stack of unique oil & gas and generic business process automation handled and improved continuously for enhanced productivity and profitability. 

People, Ideas & Objects targets North American oil & gas producers as the market for our Cloud Administration & Accounting for Oil & Gas software and service. We have further defined this market to include Exxon Mobil and Chevron down to the startups that began at the breakfast table this morning. This appears to be an impossible and misguided ambition when we consider that Oracle Cloud ERP and their underlying technologies are among the most comprehensive and technically difficult Information Technologies to support and use. We agree. Our user community and their service provider organizations, however, provide the software and services needed to support all producers. We would ask, under this configuration, what would preclude a small startup oil & gas organization from realizing the benefits of using People, Ideas & Objects for expense reporting? This is with the Oracle / J.P. Morgan Chase credit card integration we just highlighted.

This theme is evident and became abundantly clear during Oracle CloudWorld 2022 conference. It was there that they unveiled the comprehensive nature of their offering and the drive to move in this direction. It is this drive that led to the rewrite of the Preliminary Specification and the inclusion of the Operations Management module. People, Ideas & Objects believes that Information Technology has never fulfilled its promise. This is due to the lack of maturity in the underlying technology base. Oracle has worked diligently since its founding to put that architecture together and make it robust. And they can now turn it towards what everyone expected Information Technology to provide. It would be a shame for those companies that have become disenchanted with Facebook to believe that Information Technology is a false promise and will never deliver. The time has come to understand the time we are in, and to act accordingly.   

Oracle CloudWorld 2022

Being bold is the way to win, that being timid could wipe you out.

Safra Catz, CEO Oracle 

End-to-end transformation is another common theme throughout this conference. What purpose would it serve to trim around the edges and try to resolve truly existential issues with the oil & gas organizational methodology used today? One of the many points this conference reflected on is that now is the time to act. Bold action at this point will enable organizations to realize the benefits of Information Technology disruption. Safra Catz's Keynote Presentation stated that it is not time to issue a White Paper. The time required to evaluate options will be too costly. The lead time for considering opportunities and researching issues has passed. The time to implement a “plan” is now. The producer's plan needs to be bold. It has to address the issues that are causing significant difficulties throughout North America's oil & gas economy. There are existential issues confronting the current producers organizational method, which has failed and has no support or future. And the only plan available is Oracle, People, Ideas & Objects, our user community and their service provider organizations. In the form of the Preliminary Specification.

Oracle is the Premier Tier 1 ERP Provider

What has been difficult to express in the Preliminary Specification is the robust platform it is built upon. Oracle Cloud ERP is the premier tier 1 ERP solution in the marketplace. Which is difficult to understand if you've never seen it in action. Their products, technology and the Redwood interface must be seen. This is to understand that it is People, Ideas & Objects et al purpose to stand on the shoulders of this absolute giant. This URL refers to Oracle’s Best Practice Demo Series. In this series, there are several videos to learn about Oracle Cloud ERP quality, fit and feel. I cannot recommend highly enough that everyone should view "Simplify Your Month-End Close by Automating Joint Venture Management” to learn the details of how comprehensive and high quality Oracle’s Joint Venture Management product is. It is the most comprehensive Joint Venture Management system available today. And I am not aware of any North American producer using it. 

The Preliminary Specification defines seven distinct Organizational Constructs. Our key Organizational Construct is the Joint Operating Committee. This is the organizational structure to deal with Joint Ventures, the cultural method to represent partnership organizations established in oil & gas. When we move the current corporate model culture into alignment with the Joint Operating Committee, everything within the producer and industry changes. Nothing in oil & gas remains consistent with management's operations today. We are aligning the business directly on to the operational and technical cultures of how the industry has operated for 100 years. This is a culture derived from oil & gas operations partnerships everywhere. 

It is our hypothesis that in the 1960s when computers were introduced accounting became one of its uses. Soon after tax, royalty and regulatory environments were established, ERP systems focused on the corporate organization. They had nothing to do with the oil & gas business. A separation between business and technical areas grew and became a source of conflict. This precipitated a lack of communication and two independent islands competing for control. Operations dominated out of necessity and corporate elements were left to satisfy cash demands. That is what we’ve eliminated in the Preliminary Specification by aligning the business to the operations and technical culture. The Operations Management module outlines what and how that will be accomplished.

We use Oracle’s recommended architectural method of “additions” to the base of all Oracle products. This way none of the code between their efforts and ours will cause any difficulties being released into commercial software if there are changes in either environment. Exploiting the full potential and value of object-oriented programming. At the same time I can state unequivocally that both Oracle and People, Ideas & Objects are relational database developers first and foremost. 

Recently Oracle implemented a quarterly update schedule for Oracle Cloud ERP where incremental changes and upgrades are scheduled for release each quarter. People, Ideas & Objects will be participating in this quarterly release schedule for our own updates and have noted an added benefit as a result of the Preliminary Specifications structure benefiting from the Organizational Construct under the title “New Growth Theory.” That we are sharing the “non-rival” costs of the infrastructure of accounting and administration across the North American producer population. Therefore the need for each producer CFO to be heavily involved in these ERP changes each quarter can be reduced to a less onerous task when the industry can plan and implement the upgrades on a shared or non-rival basis. Innovation is incrementally increased through iterative developments. They are not big bang changes unless the organization is challenged by existential threats such as the oil & gas producer organizations are today.

We are not rebuilding an ERP system from scratch to achieve the Preliminary Specification. We are defining and catering for specific oil & gas related software developments needed to deal with oil & gas issues and opportunities today and in the future. Configuring and augmenting Oracle Cloud ERP to do so. Reorganizing the industry to function efficiently and profitably. The Operations Management module combines business, operations and technical groups into one functioning organization using the same data. Establishing the team environment necessary to collaborate within the producer organization and each Joint Operating Committee. This is deemed necessary to move forward in a challenging and difficult future. Where the most dynamic, innovative, accountable and profitable producers are provided with the most profitable means of oil & gas operations, everywhere and always.

OCI Performance Evaluation, Part II

 Collaboration's Risks and Rewards

While working in isolation we can achieve a lot of what we set out to do. When we collaborate with others, the possibilities grow exponentially. Reviewing a mountain of data seems fun. For a few people that might ring true. However, for most people the possibility of finding joy in the task is limited. As a team however, the task becomes something of an adventure with the findings being multiples of what one individual might discover. Collaborative capability needs to be part of the Performance Evaluation and Analytics & Statistics modules. 

Professor Giovanni Dosi noted that a technological trajectory is the activity of technological processes along the economic and technological trade-offs defined by a paradigm. Dosi (1988) states “Trade-offs being defined as the compromise, and the technical capabilities that define horsepower, gross takeoff weight, cruise speed, wing load and cruise range in civilian and military aircraft.” People, Ideas & Objects assumes the technical trade-off in oil & gas is accurately reflected in commodity pricing. Higher commodity prices will allow more innovation to be funded.

Trade-offs facilitate industries' innovation based on changing scientific and technical paradigms. Crucial to the facilitation of these trade-offs is a fundamental component that spurs change and is usually abundant and available at low costs. For innovation to occur in oil & gas, People, Ideas & Objects asserts that the ability to seek and find knowledge, and to collaborate are two “commodities” that are abundant today. With their inherent low direct costs, knowledge and collaboration are the triggers for a number of technical paradigms that will provide companies with fundamental innovations.

Collaborating and sharing knowledge in the Performance Evaluation and Analytics & Statistics modules, and the other modules of the Preliminary Specification, will fuel innovation. Whether that collaboration is within a producer firm, a Joint Operating Committee or a working group recently established through a Work Order. Access to these two modules should enable participants to evaluate the data with the toolset provided.

These two modules will be more useful if they are made collaborative. Not the obscure applications favored by the data obsessed. Remember Professor Dosi says that “In very general terms, technological innovation involves or is the solution to problems.” Discovery of those problems can be collaboratively done here in the Performance Evaluation and Analytics & Statistics modules. 

What we do know is that “things” happen fast. Except in organizations. Providing people with the appropriate knowledge and information to act in a fast-changing environment is difficult. Some of the difficulty in getting the knowledge and information to the right people is ensuring the integrity of the information is not breached by those not part of the organization. And we are not recommending an open information policy. The Security & Access Control module imposes high levels of integrity on all communications, data storage and information. Collaboration between firms and transparency are areas where some perceived leakage of proprietary information may occur. It is here in these collaborative communications that I ask if information loss threatens innovative oil & gas producers' competitive advantages. Those being their land & asset base, or earth science & engineering capabilities. No they don't. As we have discovered, collaborations enhance firms' and Joint Operating Committee innovation and capabilities.

The question therefore becomes how is this proprietary information and capability deployed on an as-needed basis? Professor Giovanni Dosi notes that although the free movement of information has occurred in industries for many years, it has never been easily transferable to other companies within those industries. The ability to replicate a competitive advantage from one company to another is not as easy, and may not be worthwhile doing. Dosi (1988) goes one step further and states, “even with technology license agreements, they do not stand as an all or nothing substitute for in-house search.” A firm needs to develop “substantial in-house capacity in order to recognize, evaluate, negotiate and finally adapt the technology potentially available from others.” Therefore why not focus on the need to increase the company's unique and specific competitive sources and directions?

Collaborations in the Performance Evaluation and Analytics & Statistics modules of the Preliminary Specification will provide increased value in getting original, innovative ideas and information to the appropriate people. This is in the right place and at the right time. These are the attributes the firm should pursue rather than worry about losing proprietary data or information. We note that innovation involves discovering problems. It also includes changes which Professor Dosi notes in the following.

Organizational routines and higher level procedures to alter them in response to environmental changes and / or to failures in performance embody a continuous tension between efforts to improve the capabilities of doing existing things, monitor existing contracts, allocate given resources, on the one hand, and the development of capabilities for doing new things or old things in new ways. This tension is complicated by the intrinsically uncertain nature of innovative activities, notwithstanding their increasing institutionalization within business firms. p. 1133.

It would therefore seem prudent for an innovative producer to enable collaborations in all modules of the Preliminary Specification. This is a key to their innovation strategy. Focus on dealing with the change in routines as a result of the discovery of problems and solutions. These are the areas where the innovative oil & gas producer will need to deal with the outcomes of innovation, and the overall capability to continue to innovate.

Dynamic Data and Information

How the innovative producer attains a higher innovation factor is through a constant search for petroleum reserves, increased production, lower costs and more effective management of their oil & gas assets. This search will begin with a query in either the Performance Evaluation module for the Joint Operating Committee or the Analytics & Statistics module for the producer firm itself. Having access to the data and information of the respective domain provides the user with the ability to formulate queries on the basis of different scenarios, what if’s, and other mathematical calculations. 

If we refer back to earlier parts of this module we find that performance is a key motivating principle behind the use of the module. People use these modules to find the next value increment. To determine where that value is located, it is necessary to use these specialized tools to identify it. Recall that these are subject to the Security & Access Control module, therefore the data and information they can access will be limited to the domain of the users' authority, i.e. only the Joint Operating Committees they’re assigned to. And the application modules will be collaborative, allowing interaction with others.

Running a query is a fairly basic operation that produces static output. The result just sits in the spreadsheet for the user to act upon. Within the Performance Evaluation and Analytics & Statistics modules we can invoke messaging services which include the following processes: person to person, person to process, process to person and process to process, on any of the system processes. Therefore if a process is running, and at any time that process obtains criteria for which it is necessary to know, the system will send out a message. Or if the same process was completed, it would invoke another process to initiate another action. It would also have the option of texting the system to invoke a number of different scenarios. Messaging processes bring the power of the ERP system into play from the point of view of using these calculations to act. People, Ideas & Objects have many tools in this area. Through Java, Oracle Autonomous Database, Oracle Fusion Applications and Functional Programming this area will be a rich environment for users to benefit from.

Professor Giovanni 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. p. 1135.

Performance Evaluation and Analytics & Statistics provide incentives and opportunities to innovate.

Focused on Changing Capabilities

As part of a competitive strategy, we focus on the key competitive advantages of the producer firm and Joint Operating Committee. These are their land & asset base, and earth science & engineering capabilities. These are the things that differentiate them from other producers and how they produce value for their shareholders. Everything else is secondary. We have adopted what Professor Richard Langlois calls the “capabilities approach” in his paper “Capabilities and Governance: the Rebirth of Production in the Theory of Economic Organization.”

When users are in the Performance Evaluation and Analytics & Statistics modules they will be able to look at an additional type of cost that we have recorded in the accounts of the firm and Joint Operating Committee. That is the costs associated with “Dynamic Transaction Costs” which are the unique costs incurred during times of change. Professor Richard Langlois described these costs in his article “Transaction Cost Economics in Real Time.” 

Over time, capabilities change as firms and markets learn, which implies a kind of information or knowledge cost - the cost of transferring the firm's capabilities to the market or vice-versa. These "dynamic" governance costs are the costs of persuading, negotiating and coordinating with, and teaching others. They arise in the face of change, notably technological and organizational innovation. In effect, they are the costs of not having the capabilities you need when you need them. p. 99.

The types of these costs will vary and are not necessarily the same in all instances. Breaking these down into their types may be overkill from an accounting perspective. Instead, putting them into an account called “Dynamic Transaction Costs” might be a better option. And we have mentioned that in other modules of the Preliminary Specification. However, having the ability to further analyze these costs when the time comes, from the Performance Evaluation and Analytics & Statistics modules could lead to further insight and learning into organizational changes that might, or should, be occurring. 

Indeed, in cases in which systemic coordination is not the issue, the market may turn out to be the superior institution of coordination. In general, the capabilities view of the firm suggests that we look at firm and market as alternative and sometimes overlapping institutions of learning. p. 99.

And

Economic progress, then, is for Marshall a matter of improvements in knowledge and organization as much as a matter of scale economies in the neoclassical sense. We can see this clearly in his 'law of increasing return,' which is distinctly not a law of increasing returns to scale: 'An increase of labor and capital leads generally to improved organization, which increases the efficiency of the work of labor and capital' (Marshall, 1961, IV. xiii,2 p. 318) pp. 101 - 102.

And maybe we need a page or screen in each of these two modules dedicated to breaking down these costs. Then a producer or Joint Operating Committee will have some point of reference to determine the state of change. This will enable them to determine its impact in terms of costs, and types of costs, on the organization. How the transition in the firm's or Joint Operating Committee capabilities is managed. 

F.A. Hayek (1945, p. 523) once wrote that 'economic problems arise always and only in consequence of change.' My argument is the flip-side: as change diminishes, economic problems recede. Specifically, as learning takes place within a stable environment, transaction costs diminish. As Carl Dahlman (1979) points out, all transaction costs are at base information costs. And, with time and learning, contracting parties gain information about one another's behavior. More importantly, the transacting parties will with time develop or hit upon institutional arrangements that mitigate the sources of transaction costs. p. 104.

Conclusion

Work in the 21st century will continue to be different. People's tools will also need to be different. The Performance Evaluation and Analytics & Statistics modules are the beginning of these 21st century 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 do and that is reflected here in these two modules. Computers handle storage and processing. People will be responsible for thinking, ideas, decisions, creating, collaborating, innovation and many other things. Much of this information will be generated based on facts determined through the Performance Evaluation and Analytics & Statistics modules of the Preliminary Specification.

OCI Performance Evaluation, Part I

 Introduction

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 run against the data and information contained within the People, Ideas & Objects ERP systems and other unstructured data. Providing users with the ability to analyze data in novel and innovative ways in seeking value for their firm or Joint Operating Committee. 

The types of data and information prepared and presented in these modules depend 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 bring up the next breakthrough innovation we should expect it from anywhere. Part of the innovation process is the discovery of the problem and we all see the situation from different perspectives. The point of view and innovation of each will therefore be highly dependent on the viewpoints of different groups. 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 in “Sources, Procedures, and Microeconomic Effects of Innovation.”

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. p. 1121.

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 challenging 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. 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 critical developments. The first is that innovation can be reduced to a quantifiable and replicable process. Analytical tools are part of that process. And two, the Joint Operating Committee is the key Organizational Construct of an innovative oil & gas industry. Therefore having analytical tools in the Joint Operating Committee and producer firms is critical. 

Tools for the 21st Century

This discussion deals with people's motivations to use the Analytics & Statistics and Performance Evaluation modules of the People, Ideas & Objects applications. It's one thing to have statistical analysis tools available for those who want to use them. It's another thing to have these tools being used by people who are actively looking for the next measure of performance or metric. This will reflect on how their performance can be improved. This latter use is the reason for these tools to be in the fourteen module Preliminary Specification.

We pick up on our discussion of the McKinsey article “The 21st Century Organization.” We now discuss the fourth element of that paper, “Measuring Performance.”

The final set of ideas rounding out this new organizational model involves relinquishing some level of supervisory control and letting people direct themselves, guided by performance metrics, protocols, standards, values, and consequence management systems. 

And as noted in "The 21st Century Organization” people are not measured and told explicitly what to do in their jobs. There is too much activity taking place for someone to give task lists to mindless automatons. What a responsible and productive person needs to do in this world of massive information and activity is focus on what is essential. To deal with the critical value-generating areas of their jobs that can add, and avoid destroying, value. That is where the Analytics & Statistics and Performance Evaluation modules of the Preliminary Specification come into play. Providing the user with the ability to focus on building value for their clients and employers, the oil & gas producers.

Whether they are earth scientists or engineers, business professionals or in any field that the oil & gas industry employs, access to the data and information through these modules will be critical to building value. Using the “dashboard” metaphor where algorithms monitor various processes. The user would run statistical and analytical programs that look at data in novel and innovative ways. It could be conceivable that some people may dedicate large percentages of their day to day thinking of creative ways to analyze data and information available to them.

The Downside of Analytics

I have seen this happen many times in oil & gas. Situations where the divestiture of assets is done without the full understanding of how the asset fits into the overall makeup of the organization. These types of situations happen when the “cash” mindset takes over all rational thought and the highest resale price wins over every other consideration. This is the danger of analytical tools. As we move into a period of sharper and more accurate tools, that danger becomes more prevalent.

There’s math, and then there’s strategy. The situation we observe is when an oil & gas firm runs into problems financially or operationally and rationalizes their asset base. They think they need to raise money by selling some assets. So they naturally think they’ll sell some of their “midstream” assets. A gas plant, gathering facility, and processing facility that earns only a fee. These assets, when looked at from a financial performance point of view, are nowhere near the right street where the ballpark is on. Therefore they get sold for the highest replacement cost and the seller believes they made a good deal. The fact is that most small producers may have provided their C3+ products directly to gas plant operators for fire sale prices. This is because they otherwise have no capacity to deal with them. Gas plant operators being the only ones in the area with processing facilities negotiated a favorable bargain. They acquired the majority of the natural gas liquids in the area for royalty costs. Now that the plant is sold, those products are lost and production is transferred to the newly acquired plant owners. Materially and negatively changing the properties' performance.

The majority of oil & gas producers I have seen and studied take a while to fully understand what is happening. What seems to be a jumble of activity for no apparent reason can, upon further study, become a symphony of brilliance. This was assembled over decades by someone with such profound vision that it is truly breathtaking. Selling a gas plant out of the middle of this shows that the seller doesn’t see the vision. And none of their assets will perform in a satisfactory manner. Having tools like the Analytics & Statistics and Performance Evaluation modules in the hands of people who may not fully appreciate the vision of how the firm is built could have detrimental effects on the overall health of the firm.

We found this quotation from Professor Richard Langlois in his working paper "The Austrian Theory of the Firm: Retrospect and Prospect."

The question then becomes: why are capabilities sometimes organized within firms, sometimes decentralized in markets, and sometimes coordinated by a myriad contractual and ownership arrangements like joint ventures, franchisees, and networks? Explicitly echoing Hayek, Jensen and Meckling (1992, p.251) who point out that economic organization must solve two different kinds of problems: "the rights assignment problem (determining who should exercise a decision right) and the control or agency problem (how to ensure that self-interested decision agents exercise their rights in a way that contributes to the organizational objective)." There are basically two ways to ensure such a "collocation" of knowledge and decision making: "One is by moving the knowledge to those with the decision rights; the other is by moving the decision rights to those with the knowledge." (Jensen and Meckling 1992 p. 253). pp. 8 - 9.

In People, Ideas & Objects we have moved knowledge to those with decision rights, which reside with the Joint Operating Committee. And rather than contradict ourselves, we find clarification of this issue in the following fact. Decision rights are the authority of the Joint Operating Committee to make operational decisions. Each individual producer holds strategic decision rights regarding ownership and divestiture regarding their working interest shares. Therefore there is no risk that the property will be “harmed” in any material way by making a strategic decision of that type in the Performance Evaluation module. It is beyond the Joint Operating Committee's authority. It is reasonable to assume that the authority of decisions made through the Performance Evaluation module will be limited to one producer's operational concerns. This will be mitigated in the short term. That is to say any negative decision would be reversed as soon as it is realized.

I think that it would be worthwhile to have a strategy review “attached” to each decision based on the Analytics & Statistics and Performance Evaluations. To counter the quantitative elements of the modules, the decision analysis is qualitative. If this qualitative analysis could be embedded into these modules for documentation, it would add value.

User-focused Development Tools

When it comes to what we are currently given to work with in terms of ERP systems, they can leave much to be desired. If only we could have “this, that and the other thing,” our lives would be so much easier. It would appear, however, that the inertia necessary to overcome "this" requires saintly fortitude and political skills. So we continue in what can only be described as someone's bureaucratic vision. People, Ideas & Objects seeks to resolve some of the issues users face in confronting "this, that and the other thing” in systems by basing our development on our user communities' vision and participation. Inherent in that offering is that People, Ideas & Objects are not conflicted by the traditional constraints of software code and customers. That is to say we only earn our fees based on software code changes. We are therefore agents of change, not seeking to obstruct change.

The point is that our user community can enhance the system. People, Ideas & Objects are motivated by business reasons to do so. That’s how we earn our revenue. We believe software should be constantly improved, driven by users' imaginations and requirements.

When the time comes for a user to think that if they had “this, that and the other thing," they will have a means to effect that change and have it fulfilled through our user community and their access to our software developers. But this isn’t about that change process specifically. It's about a stop-gap measure they may want to implement in the short term. This is while they wait for our user community to implement their idea.

For that stop gap measure we turn to the Performance Evaluation and Analytics & Statistics modules of the Preliminary Specification. These modules will be able, since they have access to the data, to prepare ad-hoc reports that the user can develop for themselves. Granted most of these user developed reports won’t be ready for prime time, however for the purposes of the user they can fit the need in the short term.

The user generated reporting tool will be part of both the Performance Evaluation and Analytics & Statistics modules. And provide users with a sophisticated graphical user interface to manipulate data and develop queries. We’ve all seen these tools before and I’m not suggesting anything original here. What I think is different however is access to information. First, the volumes of data will be increased and secondly the Security & Access Control module will provide access to that data and information based on users' privileges.

A World of Data

Turning again to Professor Giovanni Dosi in “Sources, Procedures and Microeconomic Effects of Innovation” for the determination of the three key factors of innovation. He notes that they are the result of: 

Search, development and adoption of new processes and products in market economies and are the outcomes of the interaction between:

• Capabilities and stimuli generated with each firm and within the industry of 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.) p. 1121.

While in the Performance Evaluation and Analytics & Statistics modules the user would search for information or insight into the data. This is the beginning of the innovation process. The tools provided in these modules would be part of the capabilities necessary for innovation to be developed within an innovative oil & gas producer. Professor Dosi's three key factors clearly show this. With growth expected to continue. These tools provide a rich resource for developing an innovative perspective on data. 

Recently, we've heard about an emerging field of data that is growing in importance. Unstructured data. Data that isn't managed by a database and has no implied meaning to its structure. The marketplace modules of the Preliminary Specification, the Resource, Petroleum Lease and Financial Marketplace modules and to a lesser extent the Research & Capabilities module all have “marketplaces” within them. These marketplaces would have substantial unstructured data that would be of use to potential users of the Performance Evaluation and Analytics & Statistics modules. Organization and access to this information on an industry-wide scale is one objective of these modules.

Taking a step further, these two modules should not be constrained to producers' internal systems. They should be able to access other sources of data and information, structured and unstructured. This is so that the user can use all three of Professor Dosi’s key factors of innovation to develop original and innovative ideas. It might be worthwhile to have a “Help” section within the People, Ideas & Objects modules. A section that includes Professors Giovanni Dosi's and Richard N. Langlois' innovation research. People would have a quick reference to items like the three key factors. This is so that they could use them in their day-to-day tasks to develop a more innovative mindset. 

For example, Professor Giovanni Dosi states 

“In very general terms, technological innovation involves or is the solution to problems.” Dosi goes on to further define this as “In other words, an innovative solution to a certain problem involves “discovery” (of the problem) and “creation” since no general algorithm can be derived from the information about the problems. Certainly the “solution” of technological problems involve the use of information derived from experience and formal knowledge (e.g., from the natural sciences); however, it also involves specific and uncodified capabilities, or "tacit-ness” on the part of the inventors. pp. 1125 - 1126.

It is therefore asked specifically, how can the knowledge, information and capability of oil & gas firms solve the technical and scientific problems of the future? How can a firm more effectively employ its capability to solve problems and facilitate the discovery of existing problems and creation of their solutions? These are the questions that the Preliminary Specification is determined to answer. From the perspective of the Performance Evaluation and Analytics & Statistics modules I think we can provide the user with a variety of tools that help them drill down into the data and ask questions that haven’t been asked. People, Ideas & Objects is an ERP system. However, as we have seen with the modules in the Preliminary Specification there is a lot of data and information generated through collaborations and item documentation. It won’t be just accountants that will want to use these two modules, but anyone employed by a producer firm or Joint Operating Committee. 

Here is a quick summary of some of the functionality and process management the Performance Evaluation and Analytics & Statistics modules provide users.

• Ability to rise above transactional work managed by other modules. We are moving from recording transactions to designing transactions in many modules. Leaving the recording of transactions to computers and the analysis to the users of these modules. 
• Use of the “R” statistical language and Apache Spark as embedded programs within both modules.
•  https://spark.apache.org/
• Configured user tools that enable the user to demo, or build small applications that fit small niche needs. If these needs grew to where more people wanted similar programs for a producers other Joint Operating Committees, they could be used as a prototype for the People, Ideas & Objects developers to build. 
• Querying and determining where the performance and direction of producer firms or Joint Operating Committees' value is. Allowing people to focus on value generation and avoid value destruction.

OCI Partnership Accounting, Part X

 Oracle CloudWorld 2022

It was during the Oracle 2022 CloudWorld conference that they introduced what I felt was an innovative direction they were taking with their products and their firm. It was the precipitating event that triggered the rewrite of the Preliminary Specification. Any blogpost preceded by OCI is a rewrite based on Oracle Cloud Infrastructure. The significance of the change in Oracle’s trajectory as to what I saw at the Oracle CloudWorld 2022 conference was obviously shared broadly. To me it was the next level in ERP systems for all industries. Representative of the maturation of Oracle hardware, software and services finally delivering what Information Technology had always promised and consistently failed to deliver. Wrapped in a coherent vision of where they were taking their products next. 

This vision sees Oracle partnering with others to provide integrated services that solve many of the low level transaction oriented busy work. The kind of work that consumes bureaucrats' time and gets them out of bed in the morning. Throughout the Preliminary Specification I’ve highlighted the J.P. Morgan Chase credit card example for business expense accounts and reporting. By using J.P. Morgan Chase credit cards employees can designate the account location of the charge for their expense. At that point Oracle Cloud ERP will evaluate the charge and ensure it falls within the company's corporate policies of what is permitted. If it is not approved the employee would be charged for the cost. Individual expense reporting tasks will be reduced to the time spent so far. Their supervisors will not review these charges and waste thousands of hours chasing the few pennies usually retrieved in that process. Employees are aware of the corporate policies and will adhere to them or will be responsible for the charge and as such uphold corporate accountability. Not some nameless, faceless bureaucrat who suddenly appears out of nowhere. 

Oracle's work is critical to providing high levels of automation. Is that it’s the same type of work that People, Ideas & Objects, our user community and their service provider organizations have pursued in oil & gas. These features would be best represented in the Partnership Accounting and Accounting Voucher modules. The difference is that Oracle automations are generic and apply to all Oracle Cloud ERP customers. While People, Ideas & Objects focus on oil & gas. Producing the benefits of both worlds for oil & gas producers. Both generic automations of the expense reporting type but also the Preliminary Specifications for oil & gas specific automations. For example, those built off the Material Balance Report. These automations are targeted at the dynamic, innovative, accountable and profitable oil & gas producer.

The Service Provider's Role

Throughout the Partnership Accounting and Accounting Voucher modules there is discussion of our user community owned and operated service provider organizations and their role. People, Ideas & Objects see the reorganization of the administrative and accounting resources of the producer firms to the service providers as the enabling means to the decentralized production model, its price maker strategy, our value proposition, the conversion of all of the producer's costs to variable costs, gain from the benefits of hyperspecialization and the division of labor and the sharing of an industry based administrative and accounting based capability. It is only possible to have an organizational structure like this thanks to the Internet and Cloud Computing. These are the elements of Information Technologies Organizational Construct that People, Ideas & Objects use to define and support service providers. 

Each service provider is owned and operated by one or more of our user community members. Each member's contribution and area of expertise will be evident during our development. This will be used to determine the assignment of an individual process for them to manage on behalf of the industry. Our user community members will own one or more service providers that manage an individual process within their area of expertise or specialization. This will enable them to automate these processes at significant levels since it is only our user community who are licensed to make changes to the software derived from the Preliminary Specification. Automation is one of the service provider's competitive advantages. The others include leadership, issue identification, issue resolution, creativity, collaboration, research, ideas, design, planning, thinking, designing transactions, negotiating and compromising, innovation, financing, conflict and contradictions, the deployment of tacit (their services) and explicit (our software) knowledge, observation, reasoning and judgment.

Managing a single process for the entire industry seems to offer a dismal, dull future. If we were focused on processing transactions and only processing transactions that would probably be the case. Based on the competitive advantages service provider organizations will have. And the number of service providers we expect. The level of competitiveness in terms of how to innovate, automate and increase the quality of the service provided would be the beginning of the focus of those services. The means to affect change are at their disposal as the service provider's owner is a user community member. Meaning they can change their process management and software. 

Service providers will charge their service fees directly to the Joint Operating Committees. It is in that way that the Joint Operating Committee can report a null operation, no profit or loss, during times when the property is shut-in. While shut-in nothing will be transferred to the service providers through our task and transfer network to trigger them to work on that property for that month. And therefore no billing is sent to the property by any service providers. Therefore, all costs associated with producer firms become variable. And the benefits of the Preliminary Specifications decentralized production models price maker strategy are realized. 

The last point I'll make in this brief summary of service provider organizations. It should be noted here that service providers will provide a standard, objective method of accounting and process management. Therefore, any producer who finds a property is unprofitable will know that shutting it in for the month is the most effective remedy. Producers across the continent will know the assessment of unprofitability from People, Ideas & Objects is the same standard and objective assessment that all other properties were evaluated under. That we are not an Exxon or Chevron derivative ERP system commercialized for industry use. Producers should not be concerned about the validity of the standard and objective nature of profitability calculations of other producers' profitability. User community based software development generates these and other quality benefits.

The shutting-in of production is the most effective remedy for all concerned. The need for profitability, everywhere and always, is an absolute necessity in commodities such as oil & gas. Commodities that are subject to price maker characteristics and are critical to our economy, society and way of life. Shutting-in of unprofitable production is the only reasonable and fair means of production allocation that can be implemented across the industry. Government mandates, industry boards or other methods always leave bitterness and disappointment in their wake. With no capacity to stop the arbitrary decision to shut-in production. While with People, Ideas & Objects if a property is evaluated based on generally agreed standard and objective financial accounting criteria then it is in their financial interests to stop diluting their profitable properties with unprofitable production. And once done, it falls within the authority of those producers to deal with their lack of profitability at their properties. Production discipline comes into play when the producer firm needs to maximize corporate profitability by no longer diluting profits with unprofitable properties production. Competition on the capital markets will be difficult when a producer's poor performance is evident.

Our wiki contains information about service provider organizations. 

OCI Partnership Accounting, Part IX

 Accounting Differences

In Canada at least, there is an accounting and production month to deal with production volume delays. Reporting volumetric information creates a one-month data delay. This is so that July’s production data will be processed and reported in August. And I’m sure everyone knows the amendment process for volumetric data. The adjustment process never seems to end. I wonder if we’ll ever find a solution to it.

People, Ideas & Objects seem to be a viable solution. We discussed briefly the Material Balance Report. While we noted that every report, and every input and output, must be balanced with other Material Balance Reports. And that each Material Balance Report serves as a Joint Operating Committee. We should note that there are some issues to be addressed in the Partnership Accounting module. These problems are caused by adjustments to Material Balance Reports. That is to say, these Material Balance Reports shift and amend volumes of products around as times pass and things are incorrect. When the physical world contradicts reporting, reporting must change. Hence the amendments.

I want to add to the discussion of the Material Balance Report by detailing the scope of the software engineering issue we have to solve. The first area of concern is that there are both daily and monthly volumes defining a period of time. Some of these volumes are “spec” vs. raw products and by-products, gas and liquids. Volumes are processed and gathered based on ownership and non-ownership of processing facilities. North America has two measurement units, American and Metric reporting standards. How gas is nominated (daily) and marketed (annually). Last but not least, royalty holders and surface property owners expect to earn money. And each of these processes could generate their own amendments.

The myriad combinations of possibilities within oil & gas must be captured and handled within oil & gas systems. That has not happened in any ERP system as of this date. The first aspect of solving this problem is to engineer a solution in software. Many have tried and found their budgets inadequate. Approaching this from an individual producer's perspective may seem like a reasonable investment, however, no one today declares success. If, as we have proposed in People, Ideas & Objects, we aggregate the industry's resources towards engineering the solution, this scope can be scaled, the costs to each producer will be incidental, and the results will be that each producer will realize the full scale of that software development effort.

The second aspect of the solution to this issue is to limit its scope. That is what we have done with People, Ideas & Objects. First, by using the Joint Operating Committee as the key organization construct. What we are doing is adopting the Material Balance Report as a function of the Joint Operating Committee. Which in reality it is. If however we separate it from other Joint Operating Committees from an accounting perspective then we can begin to view that Joint Operating Committee as its own autonomous legal entity, which it is. This simplifies the solution from an accounting perspective and helps to deal with business complexity. This discussion may not make sense until we get into the Accounting Voucher module. We also get into the final aspect of this solution which is where we encapsulate all of this reporting within the accounting system itself.

In a globalized oil & gas industry we have to deal with currency conversions in the modern era. And these are not your regular currency issues. The example I have used in the past is that a producer based in Texas (U.S. Dollar) with partners in Britain (British Pound) and Canada (Canadian Dollar) shares an interest in facilities and production in Turkey (Lira). Transactions through the joint account will be in Turkish Lira and recorded in the producers' native currencies based on the exchange rate at the time.

Another aspect of this problem is that currency conversions have different treatments for assets & liabilities than revenues & costs. Revenues & costs are converted at the time they occur and require no further action. While asset & liability accounts maintain a balance over a longer period of time, they may need additional consideration to ensure they are recognized and recorded correctly. If, for example, a producer’s finished inventory is in a country with a volatile currency, what amount should be assigned to the inventory? This could be answered by the ability to record finished inventory in US dollars. But operational costs may be valued in the domestic currency. And what about capital assets? These currency issues are predominantly producer related as they are cleared out of the Joint Operating Committee's accounts each month. Therefore the accounting for each producer in this scenario is and will always be unique.

I would however caution users in the community that the oil & gas industries' use of the Joint Operating Committee is unique. These currency issues may not be realized in other industries. And although I believe it is a fair assumption that Oracle Fusion Applications' currency management is state of the art. That state of the art would be for other industries like retail and other industries that would not have the scenario noted in this discussion. Because of the oil & gas industry's use of the Joint Operating Committee, currencies can be substantially improved. This is from the community's point of view. We are only scratching the surface of currency issues experienced daily in the oil & gas industry. These issues are what this community is after in terms of software engineering solutions that identify and support innovative and profitable oil & gas producers.

Costs Like Strategies Are Different

We should note that the cost structures of each producer within a Joint Operating Committee could be unique and mutually exclusive to each of the other producers on the property. When we expand the geographical view of the facilities owned in the area we see that ownership of associated infrastructure by producers can be remarkably different. This cost situation provides us with an opportunity to discuss the strategic choices that producers have within a Joint Operating Committee -- and adjoining facilities which are their own Joint Operating Committee -- and how each producer can maintain their own unique strategy.

In addition, since each Joint Operating Committee is autonomous from each other, a producer can choose unique strategies for each Joint Operating Committee they have working interests in. That is not to suggest that each Joint Operating Committee within a facility has its own strategy. They could, however that would be unproductive. What is suggested is that a producer could have each of their major properties operated under their own distinct strategies developed to optimize the assets' distinctive character. To reiterate, each producer within a Joint Operating Committee within a major area pursues their own unique strategy irrespective of each other's strategy.

Lastly, we recently noted that the Joint Operating Committee oversees the producer's strategic framework. It joins the legal, financial, operational decision making, cultural, communication and innovation frameworks within the Joint Operating Committee. This framework alignment is unrecognized in any existing ERP systems in the oil & gas industry today. People, Ideas & Objects is the only system to recognize, identify and support the Joint Operating Committee frameworks. In addition, People, Ideas & Objects aligns the hierarchies compliance and governance frameworks with the Joint Operating Committee seven frameworks. This alignment provides the innovative oil & gas producer with the speed, innovativeness, accountability and profitability necessary to compete in the shale-based era of oil & gas exploration and production.

Using global or generic corporate strategies is what companies did in the twentieth century. Today producers need to respond at the asset level to ensure optimal value is realized. These findings are based on extensive research conducted by People, Ideas & Objects.

People, Ideas & Objects and Oracle Corporation

Oracle Cloud ERP and Oracle Fusion Application technologies will be used in the Partnership Accounting module of the Preliminary Specification. Under the Oracle Fusion Application Financial Management Suite there are the following six modules included in the Preliminary Specification. General Ledger, Accounts Payable, Accounts Receivable, Asset Management, Payments & Collections and Cash & Expense Management. It is unknown at this time if the last three modules will provide any value to an oil & gas producer. Therefore, we will leave it to our user community to determine whether they remain and how they'll apply them. 

What we need is a solid mission critical, as they describe it, general ledger for the innovative oil & gas producer. This is for the Joint Operating Committee, the service industry and service providers. Oracle has competed in this arena since the late 1980’s with their own technologies. They have also focused their energies outside of their core database technologies on ERP systems by acquiring the top vendors in the business. When it comes to ERP software, SAP and Oracle are the two Tier 1 providers in the ERP software industry. 

When it comes to the technologies these systems are built upon, Oracle, in my opinion, wins out in a very substantial way. Their updated strategy is "hardware and software engineered together." And they have the industry leading products to do just that. With Oracle Servers, Oracle Operating Systems, Oracle Database, Java, Oracle Fusion Middleware, Oracle Fusion Applications and Oracle Cloud ERP all being industry leading proprietary technologies. SAP competes primarily on the ERP application layer, however has recently built their own database and tools. Oracle technologies are new. All Fusion products were written from scratch. Reflecting Oracle's significant commitment and investment in Java and database technologies. 

When we developed the Preliminary Specification we used modularity theory extensively. As defined in the modular definitions of the Preliminary Specification, for the producer firm, the market, and the Joint Operating Committee. Oracle also used modularity theory in Fusion product development. Enabling us to build industry specific functionality that works seamlessly with their technologies. Everything we need to build will be built on Oracle Cloud ERP. It is at the point where we'll be offering our Cloud Administration & Accounting for Oil & Gas software and service.

So when we begin to write the code for the Material Balance Report we will be standing on the shoulders of giants by using Oracle Fusion Applications and Middleware as the basis of where we start. And we will use the General Ledger, Accounts Payable and Accounts Receivable, as a minimum to provide the innovative oil & gas producer, Joint Operating Committee, service industry and service providers, no matter their size, with the mission critical capabilities of the industry leader in all of these product categories. 

Let's turn now to the comprehensive nature of the accounting done in the Partnership Accounting module of the Preliminary Specification. Whatever kind of accounting is done in the Preliminary Specification, whether it be for the producer firm, the Joint Operating Committee or the service provider, Partnership Accounting and Accounting Voucher are the two modules that capture everything an accountant will need. From the General Ledger to the Financial Statements of the producer and Joint Operating Committees everything a user needs, from management accounting to financial accounting will be here. 

To provide for this we will be using the Oracle Fusion Application Financial Management Suite of modules as the base of the Preliminary Specification. Included within that are the General Ledger, Accounts Payable and Accounts Receivable modules that will be used extensively. It will be here in the Partnership Accounting module that the People, Ideas & Objects user community will determine the need for the other Oracle Financial Management Suite modules of Payments & Collections, Asset Management and Cash & Expense Management. 

It is critical to stress our users' involvement in determining the input, process management, function and output of the Partnership Accounting module. As with all of the modules within the Preliminary Specification this is an opportunity to define what users need and want in terms of Information Technology in oil & gas firms. This should be considered a once in a lifetime opportunity. There will be very limited opportunities to join the community to have an impact once the Preliminary Specification begins commercial operation. The time to participate is now. If potential users can see value in the development of the People, Ideas & Objects systems, they should begin the process and participate as soon as possible. 

Outside of the core Oracle modules we will be doing a significant amount of development that will be key to the oil & gas industry. This will require us to drop down into the Oracle Fusion Middleware layer to access a very elaborate Java server. This will be used to provide the revenue and royalties systems that build off the Material Balance Report. Recall that the Material Balance Report is also crafted at this layer. Management of the firm and Joint Operating Committees capital and operating costs. And of course, revenues, royalties, capital and operating expenses will all be reported in gross and net values. Users may have extensive ideas about how they want their data to be displayed. They may want traditional formats like the Statement of Operations and Statement of Expenditures. This is just a small example of the Preliminary Specification feature set.

As we will see in the Compliance & Governance module there are extensive capabilities in the Oracle Fusion Applications. These capabilities enable the Balance Sheet, Income Statement and Statement of Changes in Financial Position to automate compliance. Updates to the regulations are done through Oracle and affect the Financial Statements submitted to the regulators. All in all providing the producer with an automated system from field data capture to financial statements is a wide-ranging scope, and one that should motivate everyone to participate in this worthwhile endeavor.

In addition to the Oracle Fusion Application Financial Management Suite General Ledger, Accounts Payable and Accounts Receivable modules we will use the Oracle Fusion Application Human Capital Management Global H & R Payroll module. Technically it will need to be worked out by our user community how each producer is able to charge the joint account for these costs. However, that does not present too difficult a task when we have the control being handled through the Joint Operating Committee and the Security & Access Control modules Industrial Command & Control. 

There is another assumption in the People, Ideas & Objects Preliminary Specification regarding specialization and the division of labor. And that is the division of labor between computers and humans. I suggest we cease operating in large part, from an accounting point of view, as quasi computers. Instead, I suggest we let computers handle the work that computers do best. Storage and process management are their domains and the sooner we leave these tasks to computers I think the better off we will be. The things that we are better at are the decisions, the ideas, the innovations, the change management, the planning, the creative process among many other things. These are the elements of our work that we should focus on and leave the computers to do the work that they do best.

Oracle introduced a few new concepts to its products years ago. Oracle Cloud ERP and all associated technologies are upgraded quarterly. Each upgrade contains up to 200 changes to the software and requires the attention of senior management in terms of implementation and configuration. This upgrade cycle keeps their product fresh and enables them to introduce enhanced product features faster. People, Ideas & Objects will participate in Oracle's upgrade cycle. Our service providers will support senior management in coordinating a shared and shareable understanding of the implementation and integration of Oracle and our updates. 

Secondly we are adopting the Oracle recommended method of making "additions" to the underlying software code. This is in contrast to building the modules as separate applications that reside as "customizations" on top of the Oracle product suite. Oracle’s recommendation is consistent with Java’s object model of polymorphism, inheritance and encapsulation. This will eliminate much of the conflict and difficulties Information Technology customers have experienced in the past. Where vendors debate which vendor was responsible for errors or omissions. Technically, these conflicts will have been identified and resolved prior to compile time.