OCI Operations Management, Part VII

 Performance Evaluation

The Operations Management module brings together an advanced toolset that producers and Joint Operating Committees can use to develop and test more advanced criteria for better performance. The combination of the Analytics & Statistics, Performance Evaluation and Artificial Intelligence modules within the Operations Management module is advantageous due to the combination of financial, operational and technical data and information. This data being the engineered and documented data that is the output of the process of building the Preliminary Specification. It establishes the objective and standard qualities necessary for its unimpeachable nature of what is presented and understood by its users.  

Working on the performance aspects of the producer and Joint Operating Committees the user of the Operations Management module doesn’t need to make decisions based on incomplete data or information. The reliability and understanding of the conclusions made are only as good as the data and information quality, its consistency and what users believe the data represent. To suggest that Artificial Intelligence will be of any value when the data and information it uses is questionable, is only the latest iteration of an Information Technology widget. This is the solution to a business problem. People, Ideas & Objects approach to Artificial Intelligence is fundamentally different. 

As I indicated in the Pro-forma Worksheet section of the Performance Management section of this module, the use of decision making based on factors outside of the accounting system framework, which is imposed when applying the Pro-forma Worksheet, would lead to incorrect assumptions and hypotheses. This is of particular concern when using the Performance Evaluation section to make performance based decisions on actual, factual data. However, this is not using the strict interpretation of the financial accounting system. This leads to incorrect decisions being made based on clean data regardless of the interpretation used. However taking the SEC’s perspective is not how innovation is developed. New and creative perspectives and ideas need to be developed and understood for their stand alone value to see their worth. Once proven in the Performance Evaluation section, testing the theory in the Pro-forma Worksheet would provide its business understanding and implications. 

This is the point of divergence between what investors believe they see in oil & gas, and what the officers and directors produce. The SEC coordinates with accounting standards bodies and audit firms to provide a generic understanding of financial accounting in North America. Such that when an investor analyzes an annual report from company A in industry B, they can use the same understanding and apply it to company C in industry D. They then can make the appropriate decision as to where to invest their money for the optimum return. When company A in industry B has jumped off the cliff in terms of financial accountings generic understanding. Pursuing facetious objectives such as "building balance sheets" and "putting cash in the ground," and generally having begun using their own criteria to exaggerate their financial performance, investors appropriately feel betrayed. 

The purpose of this use of an SEC standardized North American reporting system is substantial. It eliminates the need for investors to review each and every document for each potential investment they consider. When they understand the general framework of how the North American reporting system operates, they can defer to it and not have to spend the time reviewing the details at great cost to themselves and at the same time incur an unacceptable cost for the firm to cater to each and every potential investor's questions, their concerns and needs. Markets operate on information. Information in the form of price. When the market understands how that price is generated, it can function efficiently. 

It is the implications of the changes within the Pro-forma Worksheet that have to be considered in all cases. It is doubly so when the combination of many changes may have an overall negative effect on earnings that needs to be avoided. Or the changes that generate any detrimental consequences need to be removed. When producers can see what their investors in oil & gas understand, adjust their decision making to ensure profitability everywhere and always, and the consequences of those decisions being made, they will avoid future difficulties, miscommunications and errors with their investors. 

Analytics & Statistics, Performance Evaluation

These two modules consist of tools that provide their users with the ability to perform statistical analysis on the data and information they're authorized to access. The Performance Evaluation module is for the Joint Operating Committee and Analytics & Statistics provides the same tools for the producer firm as a whole. The difference is that the domain of data and information is constrained in the case of Performance Evaluation to the Joint Operating Committee members.

The means to build a library of tools to use personally, as a team, a Joint Operating Committee or a producer firm are available in each of these modules. The use and reuse of these formulas will provide accuracy, understanding and value to each organization. The domain of an individual's data is governed by their authority and responsibility within the organization of concern. It would be managed by Oracle Autonomous Database role definitions.

Artificial Intelligence

ChatGPT has demonstrated my concerns about Artificial Intelligence and its value. Producer firms have been using Artificial Intelligence in their organizations for up to three years and I cannot notice any marketable increase in their performance. I often tell people who seem so enamored with AI, the ones all over Facebook, that they should write a software program. Find out how difficult it is to conduct anything serious in technology and reconcile their AI vision with that reality. 

Our approach in the Artificial Intelligence module is cost mitigation in this initial phase of the technology introduction. Artificial Intelligence costs and resources are high. As with any innovation, costs need to be controlled and monitored effectively with the appropriate organizational means. In People, Ideas & Objects Preliminary Specification AI is a shared and shareable resource due to its software nature and high development costs. It is also due to the demand for high cost, quality resources that may be displaced from productive activities. If each producer incurs these costs on their own we’ll find the other factor consistent in today’s AI implementations. There are currently only 1% of AI initiatives that are successful. 

Separate and distinct from the Analytics & Statistics module. Artificial Intelligence in the Preliminary Specification is a shared and shareable resource available to producers and Joint Operating Committees. Based on the development of a packaged, proven number of algorithms tried and tested before availability. Artificial Intelligence is potentially a powerful tool that can add significant value to a science-based industry such as oil & gas. However, each and every producer throwing resources at this unproven technology will, I believe, ensure that it achieves its unproven nature. When it fails to deliver value after the commitment of significant cost, it will join Windows NT, Y2K, and Big Data in their hall of shame. With the high cost of AI and its success rate below 1%, sharing the costs of the infrastructure of these non-competitive resources, producers will be able to deploy it as they discern its value. 

Therefore if we provide a means in which service provider contributions were available, where collaboration across the industry as to the application and use of the AI algorithms, what are the possible enhancements etc. The need to control costs and share in success / failure can be managed once across the industry instead of at each individual producer. When and if the success and value of the AI resources break out into a meaningful and highly valuable discipline. The industry will be able to benefit from what it has learned in this initial phase. It will turn it into a competitive advantage and build individual capabilities in-house for what is deemed necessary. If it is deemed a success there would be an initial infrastructure in place from the collaborations and markets established through these service providers. This would be something to build upon. Today there appears to be only science fiction. 

There have been too many times that we’ve been led to believe that some whiz bang IT product or new version of software was promised to turn the world upside down. AI appears to be today's approach. People, Ideas & Objects approach is to initialize the technology within the science and technology based industry of oil & gas. Control its costs through the Organizational Construct of making it a non-rival cost, or part of Professor Paul Romer’s “New Growth Theory.”   

Operations Management Conclusion

Producers in oil & gas are faced with a challenging dichotomy. One in which profitable operations are the only acceptable means of production everywhere and always from this point forward. Much has been wasted in the past decades leading to unsupported capital structures. Damage and destruction are extensive. Only a comprehensive rebuild of the industry and its service industry based on the Preliminary Specification resolves the existential organizational issues facing the producer officers and directors. Continuation of “muddling through” does not appear to be capable of dealing with these issues or resolving the most difficult future the industry has ever faced. Officers and directors have certainly had time to do so. The other side of this dichotomy of providing profitable oil & gas operations everywhere and always is that the consumer needs reliable, secure, abundant and affordable energy resources. With North American energy independence fulfilled in the 21st century. With 10 to 25 thousand man hours of equivalent manpower contained in each barrel of oil equivalent. This resource supply is necessary for our civilization.

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

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

OCI Operations Management, Part VI

 Research & Capabilities

The Research & Capabilities module of the Preliminary Specification captures and documents producer firms' explicit knowledge of their earth science & engineering capabilities and capacities. Their development and control over the innovative process, of which the Preliminary Specification has two primary innovative processes being managed. With deep connections to the service industry, collaborative efforts throughout the industry and its tertiary industries advance the science and technology of the oil & gas business iteratively. The interface between the Research & Capabilities and Resource Marketplace modules establishes these connections to fulfill the various roles and responsibilities for the completion of any initiative. As a science-based industry whose demands will become ever more complex and difficult, it will be the innovative advancement of that science and its interplay between the industries innovative technological development that in turn push the science forward. 

Control of this innovation process is a necessity as the tendency is to disallow innovation within the firm to ensure it does not become a free for all. Where experiments are tried by various different groups that may succeed or not, only to have them tried again and again each and every year. Highly wasteful, unproductive, un-innovative and costly undertaking. The ability to fully develop, test and deploy on a sample basis the innovations that are developed, to have those well documented in the Research & Capabilities module in order for people to see what the state of affairs are in terms of the innovations development and its pathways taken, as innovation is defined by its process of discovery and failure. To have explicit knowledge captured and where to turn to acquire the tacit knowledge to implement the innovation provides producers with the ability to stop wasteful “innovative approaches” being undertaken in North America today. What we’ve learned is that innovation is a defined process that can be replicated throughout the organization. It must be controlled and managed to ensure costs are not unnecessarily high. Innovation results can be achieved through the sharing of ideas through a science-based business that collaborates to move its science forward.

Explicit knowledge should be captured as robustly as possible. Providing information and knowledge about who and where tacit knowledge can be deployed. Acquisition of Intellectual Property through the Research & Capabilities module is an opportunity that must also be undertaken. People, Ideas & Objects Seven Organizational Constructs have Intellectual Property as one of the foundations of how the industry moves forward innovatively and otherwise. Without Intellectual Property being appropriately managed, no one can persist in bringing about new ideas when they take so much time and effort and are subject to so much risk of poaching in the marketplace. Conversely producers and Joint Operating Committees can mitigate the high costs of innovations through Intellectual Property's assertion that no derivative works are authorized without a license. Therefore unnecessary duplication of effort is eliminated in the marketplace. Yet at the same time the ideas are known and others can learn from and upon them. 

It is here within the Research & Capabilities and Knowledge & Learning modules that the producer or Joint Operating Committee can source and organize the team they need for the task at hand. Using the search facilities within their own firm, the Joint Operating Committee, the firms they’re associated with or the larger market of producers and consulting firms. Producers will be able to acquire the resources they need to ensure the task is completed through the Preliminary Specifications Work Order. With the Preliminary Specification we are using specialization and the division of labor to resolve the current and anticipated resource shortfall in engineering and geology. However, we believe that with this diversity of resources, the demands from enhanced specialization would put the producer firm beyond the point of commercially viable operations if they attempted to maintain these specialized resources internally. We have therefore eliminated the "Operator" designation of one producer within a Joint Operating Committee. This is because providing all of these specialized resources to the Joint Operating Committee is unworkable. And therefore People, Ideas & Objects established the “pooling concept” where all participants in the Joint Operating Committee commit their unique, specialized resources to the property and any shortfall is filled by the market of consulting firms or other producers. Establishing a second source of revenue for each producer firm that generates revenue to offset the increased costs of maintaining these hyper specialized engineering and earth science capacities and capabilities. Management of this entire process is the role of the Work Order of People, Ideas & Objects.

Knowledge & Learning

We should begin the discussion of the Knowledge & Learning module with an appropriate quote from Professor Richard N. Langlois in “Transaction Cost Economics in Real Time.”

In this sense, the ability of a large organization to coordinate the implementation of an innovation, which is clearly an advantage in some situations, may be a disadvantage in other ways. Coordination means getting everyone on the same wavelength. But the variation that drives an evolutionary learning system depends on people being on different wavelengths - it depends, in effect, on out-breeding. This is something much more difficult to achieve in a large organization than in a disintegrated system. Indeed, as Cohen and Levinthal (1990a, p. 132) point out, an organization experiencing rapid change ought in effect to emulate a market in its ability to expose to the environment a broad range of knowledge gathering 'receptors'. p. 120.

In terms of Organizational Constructs the Preliminary Specifications Knowledge & Learning module relies heavily on the Joint Operating Committee, specialization and the division of labor, Intellectual Property, Innovation and Markets. Five of the seven show a high dependence on cultural influences. This tells us that the implementation of this module will be difficult as cultural forces will resist these changes. To which we'll apply our standard approach of ignoring them as we’re rebuilding the industry. And secondly the module form will have strong cultural support once what exists is forcefully ignored. 

While the Research & Capabilities module is a producer-facing module that captures and documents the distinct competitive advantages of the firm's earth science & engineering capacities and capabilities. The Knowledge & Learning module is a Joint Operating Committee module designed to meet specific property needs. 

People, Ideas & Objects use specialization and the division of labor throughout the Preliminary Specification as an Organizational Construct. This is to focus the producer and Joint Operating Committees organizations on what they do best. These specializations are broad and diverse and include allowing computers to store and process information while allowing humans to do what humans do best. This is comprehensive and not just shuffling data about. We have specialized the process of innovation development within the producer organization to ensure they’re constrained, focused and controlled by results and deliverables. The Knowledge & Learning module focuses on the Joint Operating Committees ability to take the producer firms that are working interest owners of that property. And select from each firm what specific capabilities and innovations are available. Select what capacities are needed by that property and for what role they’re required. Organize and deploy them to ensure field objectives are achieved.

It should be noted here that the information, the capabilities that populate the Knowledge & Learning module for each Joint Operating Committee. Are not the full complement of what the producer has developed in terms of capabilities. Each of the producers' capabilities when developed and made available will be selected or tagged with the type of capability and its application. Therefore a capability involved in multilateral fracing will not be populated into a producing zone, operation type or region to the Knowledge & Learning module of a Joint Operating Committee without those characteristics. It will only receive the capabilities of those producers for the purpose of the project. 

It is this process of specialization in earth science & engineering resources that will cause producers to incur uncommercial operations under current management. Having the full breadth of skills in house will demand too extensive infrastructure and resource uptake for producers to remain viable. Particularly in the era of looming constraints on these resources. People, Ideas & Objects have therefore eliminated the “operator” designation and created the “pooling concept" to resolve these resource and specialization issues. This reorganization is necessary as the demand for these resources is subject to many changes outside the producers' control. The current brain trust is retiring and the university intake is not enough to replace them. Higher throughput is needed for energy independence and the demand for incremental earth science and engineering effort increases with each barrel of oil produced. Methods are necessary to deal with this issue. People, Ideas & Objects provides the only viable alternative to elevate an organization's throughput through specialization and division of labor.  

The question then becomes what amount is charged to the Joint Operating Committee for hourly resource charges through our Work Order system? What we have developed is a unique factor that represents the value of each producer's performance, capability, and value. This is in terms of their earth science & engineering capacities and capabilities. Revenue Per Employee will be used to determine the charge out rate of any of these individuals who will work at a Joint Operating Committee. This will be done through the Work Order system. A senior engineer will be charged at x% and a junior engineer will be charged at y% of Revenue Per Employee. The diversity in calculating Revenue Per Employee numbers throughout the North American producer population provides remarkable variance. It is the only factor that differentiates the producer's quality in terms of performance. Any overt attempt to increase the producers Revenue Per Employee factor would only create incremental shareholder value and spark competitiveness within the industry to increase this factor. The initial limited production of start-ups and small producers would require a floor price for these resources.

Preparation and development of the producer's specific capabilities, and most specifically their innovations. Are processes controlled and managed within the Research & Capabilities module. Seeking to reduce innovation costs by controlling, testing and developing them before deployment. And to ensure that the producer organization is not consumed by too many similar innovations repeated throughout their organization. Once the innovative procedures are documented in the Research & Capabilities and are ready to be deployed. It is through their availability to the Joint Operating Committees that each pertinent property working interest producer can access those capabilities. They can also select them to be implemented. It is the Knowledge & Learning module that is the method that innovations, capacities and capabilities are deployed within the property. Using the fully tested and documented processes which each Joint Operating Committee producer has established and made available for use.

What may appear to be freewheeling markets to some of the existing officers and directors of the producers today is nothing more than the difference between using the market to provide for what the producers need. As opposed to what is tightly controlled within producer organizations under the “operator” designation today. Freewheeling markets may be an apt description of innovative developments as they are perceived to be chaotic. However they should not be considered uncontrolled in the Preliminary Specification. I would suggest that in the Knowledge & Learning module the ability to maintain high levels of operational control is available through these interfaces. In the Operations Management module we see many aspects of operations that are not currently provided. The data and information from the financial, operational and technical domains have all been engineered during the People, Ideas & Objects et al software development process. This is to ensure their high levels of integrity and accuracy. The level of documentation of capacities and capabilities is done for a variety of different reasons and the purposes are comprehensive. The ability to deploy producer resources through standardized and agreed methods of what the program will consist of. This is once selection in the Knowledge & Learning module has been made. And lastly, control of the operation through Work Orders, AFE's, Job Orders and other means. This will appear messy at times, however reliance on the process will ensure the outcome.

People, Ideas & Objects believe that higher commodity prices are a reallocation of capital necessary to fund innovations and capital deployment. This is for that very long list of capital projects in North America. “Muddle through” doesn’t appear to have identified the problem and the firm's officers and directors continue to sail through clear blue waters, or so it seems. Conversely the Preliminary Specifications price maker strategy is designed to ensure that the actual, factual costs of oil & gas exploration and production are recorded within each Joint Operating Committee to ensure that they remain financially successful at all times. If they are no longer profitable, these properties are shut-in so that they’ll generate a null operation, no profit but also no loss. At that point the Joint Operating Committee can turn to the Knowledge & Learning module to determine what is the most effective course of action to remedy its lack of profitability, and return it to profitable production as soon as possible. In an environment of ever increasing costs the accuracy of actual, factual, standardized and objective accounting information will be critical.

A question I would ask at this point is who do we want to participate as partners in Joint Operating Committees? There has been an interesting trend in oil & gas renewal over the years. The 1970s and 1980s saw a landscape dominated by large corporations transition to independent and start-up producers become the dynamic growth arena in the 1990s. Today many of the producers from the 1980s and 1990s that set out as the independent producers movement in the oil & gas industry are no longer with us. The past few years have seen high levels of consolidation to survive oil & gas difficulties leaving even fewer producers than before. Consolidation has been highly beneficial for the clean energy industry but not much else. Now that officers and directors realize their misdirection into other industries is a mistake, will they ask for forgiveness? Will that allow us to trust them that much more? What we believe the Joint Operating Committees would best be represented by start-up and small producers. They are the ones that have driven the change in the industry and it is the change most needed today. Innovation demands that we expand the reserves base, increase revenues and reduce costs. What have we seen from the consolidated producers? Basically, they are misguided adventures and nothing more. People, Ideas & Objects Preliminary Specification uniquely caters to all sectors of the North American oil & gas producer population.

Conclusion to the Research & Capabilities, and Knowledge & Learning modules

These two unique modules are designed to deal with the distinct competitive advantage of the producer firms through what can only be seen as the most difficult and challenging period of oil & gas history that begins today through to 2050. The transition to profitability everywhere and always will be challenging when business discipline takes center stage in decision-making. And it will be there that better, actual, factual, standardized and objective information in terms of comprehensive financial statements and other information will be provided for each Joint Operating Committee by the Preliminary Specification enabling those decisions to be made through this Operations Management module. When there is little business information available, these resources resort to their own means of determining what the situation is. The status of the industry today is the consequence. 

To suggest this occurred accidentally would be incorrect. There is no doubt in my mind that the lack of funding of even reasonable levels to ERP providers in oil & gas was deliberate. Self-serving officers and directors who choose not to answer for their actions. Discovered they were successfully able to attain their lofty objective through purposely inadequate ERP systems, disorganization, comprehensive unaccountability, their excuses, lies and viable scapegoats. When was the last time officers and directors took responsibility for any aspect of their authority or the business they’re responsible for? They’ll state that “oil & gas is such a complex industry,” hide the details, confuse the point and claim they don’t have the data, which they don’t. Excuses that become too convenient and easy when endlessly repeated. 

In 2015 their investors said enough and ceased to fund the industry further. An industry that’s incapable of supporting itself through profitable operations. An industry where officers and directors are personally satisfied with what is generated in terms of cash flow from investors' prior investments, keeping them enthused for another year. They’ve lost common sense of what a business should do and how it should do it. Establishing corporate objectives such as “building balance sheets” and “putting cash in the ground” as reflections of how obscure and indecent their lunacy has become. 

Nonetheless the industry is in a state where its issues throughout North America are serious and demand resolution. The seriousness of difficulties is not only the volume of issues, but their consequences. I’ll first quote Professor Richard Langlois’ paper “Transaction Cost Economics in Real Time”

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.

The protracted oil & gas downturn, COVID and other concerns leave inappropriate staffing levels available in the industry. 

The inventories of work-in-progress within the industry and producers are shallow and demand excess attention. Issues such as shales decline curve and the cannibalization of normal operations processes. What capacity is the industry capable of operating at?

Capacities and capabilities in the service industry are a severe detriment to the needs of the producers in the normal course of business. Service industry representatives are not motivated to rebuild the infrastructure producers destroyed during the past decades and most recently during the COVID epidemic. 

The service industry will not rebuild itself only to be ruined again by producers. Their thinking is that if the producers had some skin in the game, they'd think twice about destroying that industry again. As a result, the producers can fix what they broke. Oil & gas producers are the primary industry and all others participate in secondary or tertiary industries. 

Rebuilding, refurbishing, reclamation and infrastructure need to be undertaken on a scale never done before. Just to maintain current production levels. The status quo is unacceptable to the most powerful economy in the world. If we become dependent on foreign sources of energy we may no longer be able to claim the title of most powerful economy.

The serious nature of the consequences of continued inaction on behalf of officers and directors will have a severe impact on all those involved in North American society. Officers and directors are fine and thank you for asking. They are oblivious, uncaring and fundamentally inactive. “Mudding through” and “doing nothing” are the only strategies and tactics I've seen from this bunch. They can sit high above and criticize the Preliminary Specification because it didn’t have that feature or they didn’t like that one. They can wait for exactly what they're thinking when they’re “muddling through” certain some will provide it someday.

However we are undertaking a comprehensive rebuild on the basis of the Preliminary Specification vision. We will not compromise with them or deal with them in any detail. We’ll ignore their cultural influences and establish the performance-based culture we seek. A comprehensive rebuild at this time will be less onerous, and it will take far less time than dealing with their compromises and culture. And our user community will be far more successful in building from the ground up to break away from the losing traditions of today's oil & gas producer. What of anything that is occurring today in oil & gas is worthwhile?

I’ll reiterate that the Intellectual Property that underlies the Preliminary Specification is comprehensive. Any attempt by producers, officers and directors to circumvent our IP will be dealt with. It is unlicensed and unauthorized, and they are warned not to use it. Other software companies whose revenues depend on their Intellectual Property respect other software vendors' Intellectual Property. Therefore we feel the appropriate level of assurance is that none of our IP will be used by them. The implications of this are broad and consequential to the producer firms. They are therefore unable to breach what we have set out in any attempt to establish alternative ERP systems. As indicated earlier in this conclusion to the Research & Capabilities and Knowledge & Learning modules. Producer officers and directors are probably satisfied with that as it reinforces their method of operation permanently. Or until someone decides to build the Preliminary Specification under our Profitable Production Rights initiative. 

Finishing off the Research & Capabilities and Knowledge & Learning modules we have a quotation from Professor Richard Langlois that builds off of Harvard Professor Carliss Baldwin’s “Knowledge begets Capabilities, and Capabilities beget Action.” There is the quotation from Professor Richardson that capabilities are the “Knowledge, Experience and Skills” (1972, p. 888) to which we at People, Ideas & Objects have added “Ideas.” And this next quote from Professor Langlois helps to bring the clarity we need. From Professors Richard N. Langlois and Paul L. Robertson "Firms, Markets and Economic Change: A Dynamic Theory of Business Institutions."

In a metaphoric sense, at least, the capabilities or the organization are more than the sum (whatever that means) of the 'skill' of the individuals in the organization. In addition to the ‘skill’ of the firm's physical capital, there is also the matter of organization. How the firm is organized - how the routines of the humans and machines are linked together - is also part of a firm's capabilities. Indeed, 'skills, organization, and technology are intimately intertwined in a functioning routine, and it is difficult to say exactly where one aspect ends and another begins' (Nelson and Winter, 1982, p. 104). p. 106.

OCI Operations Management, Part V

 Accounting Voucher

Among the two pure accounting modules of the Preliminary Specification, the Accounting Voucher introduces several new dynamics to the petroleum industry. Introducing the Accounting Voucher as an encapsulated document that holds the information that supports transactional information captured, approved and recorded in the accounting system of the producer or Joint Operating Committee. To deal with resource constraints in the earth science & engineering disciplines People, Ideas & Objects have used a variety of methods to deal with the issue. These are listed in the Organizational Construct section of our Wiki. The predominant Organizational Construct affecting this change in the Accounting Voucher is specialization and the division of labor. Specialization and division of labor are the only proven methods to increase organizational productivity. Therefore each producer will need to contribute their highly specialized technical resources to the Joint Operating Committee to provide for the full set of necessary resources. These may be augmented through outside consultants who specialize in the lower level skills of these disciplines. Providing producers with the opportunity to specialize in their distinct competitive advantage. 

Therefore what People, Ideas & Objects have done in the Accounting Voucher is provide a “role” in Oracle Cloud ERP which provides for the authorization necessary to incur costs on behalf of the producer or Joint Operating Committee. And therefore within a Joint Operating Committee there may be multiple technical resources that have authorized expenditure authority on their behalf. As a result, an Accounting Voucher in this instance is a Joint Operating Committee-based voucher with overall budgetary authorization granted through the AFE process. However multiple firms may have this secondary or tertiary authorization, within the scope of the AFE to approve specific expenditures to be purchased and payments authorized. That Accounting Voucher is therefore part of each accounting system of the Joint Operating Committee working interest owners. 

The Work Order, mentioned elsewhere, is an Accounting Voucher that has been modified and enhanced to conduct processes generically. This fits the description of an Accounting Voucher's use as a Template. Essentially, it inherits Accounting Voucher capabilities as it incurs costs and allocates them in either of its two approaches. Our developers will, at our user communities' direction, build the necessary infrastructure to meet the needs. This will instill the Work Order as a permanent industry-wide Accounting Voucher Template to manage their costs. 

Data, Information and Performance

We can step back for a moment and reflect on how much time and frustration are consumed by collecting data, moving it from one location to another, interpreting, and recalculating it. What can we do to stop this financial drain that no one can support the continuation of? Could we isolate the actual, factual information necessary? We could store that data in one location of the producer and have the system interpret it in the manner necessary for each of its users. Relational Database theory is designed for this purpose. Does the potential explosion of data as a result of upcoming technologies demand we look at these issues and address them? The development of the Preliminary Specification, our user community and the reorganization of administrative and accounting resources into their service provider organizations brings about this opportunity to set the foundation for realizing a more constructive basis for understanding the producer firm. And possibly the most valuable aspect of this information change for producers would be the quality of the decisions being made. These decisions are more precise, reliable and factual. 

There is another critical aspect to the reorganization of data and information. This is the producer firm's performance. How does a producer accelerate their throughput performance, trajectory and velocity? As the foundation of the industry, would clean data and information be standardized and objective, if everyone knew and understood its origin and purpose?

Or is “muddle through,” and “do nothing,” appropriate for the next generation of oil & gas officers and directors? They have their model and we should understand it now. We’ve seen them embrace Artificial Intelligence, digital twins and I can guarantee the next three buzz words coming out of the Information Technology industry will be immediately heralded as “the savior of the industry that’s already providing huge gains in performance.” Yes, it is that bad. This is addressed in the Preliminary Specification.

Material Balance Report

Another implementation of the Accounting Voucher is the Material Balance Report. This is a comprehensive approach to production reporting and balancing through to its ultimate disposition. The Material Balance Report is an Accounting Voucher Template augmented to deal with Joint Operating Committee unique needs. And then saved as its own Accounting Voucher Template, to be reused each month. As changes occur and additional production, facilities or dispositions are added to the specific Accounting Voucher its Template is updated to accommodate those changes for that and subsequent months.  

The key overall objective of the Material Balance Report is to reconcile oil & gas reporting volumes on the continent in an unimpeachable form. It is at that point that we have the basis to automate subsequent processes throughout their production months lifecycle. Whether that is production, accounting, administration, marketing, regulatory reporting or royalties. These are all dependent on the Material Balance Report data and information. 

Undertaking this from the global perspective of an industry initiative is possible, valuable and necessary. The costs are too high for one firm and the net benefit is not continental reconciliation as the basis of automation. This may be perceived as too ambitious. However it can be done and it is far easier than it sounds. In 1994 the Alberta government introduced their Royalty Simplification system that reconciled the entire province's monthly volumetric natural gas and liquids production on this basis. To the satisfaction of where the government was confident enough to assess royalty shortfalls based on volumetric reporting anomalies. What could be done three decades later is unknown, however improvement is assumed. To not undertake this will leave the industry at the mercy of manual processes that consume human resources in redundant processes that should be deemed unnecessary. These people are needed to make the appropriate decisions as to where and what needs to be done to profit.

Production

There is an abundance of opportunities for combining, comparing and reconciling the three sources of data and information that producers and Joint Operating Committees depend upon. Financial, technical and operational sources that are unimpeachable in quality are lofty objectives, however necessary to base future decisions. To be consumed with data in the future may be the operative word for unprepared producers. If we do not spend the time to organize and ensure that the data and information we are using and preparing is of this high quality, it's a simple manner that’s well known by most of “garbage in, garbage out.” Decisions need to be made at a scale that is logarithmic to what’s done today. These are the areas people will spend their time. If we are in an endless paper chase looking for the source of the actual data, that will be the eventual outcome of the current officers and directors' obstinance. These may be the two possible scenarios in the future of oil & gas. An endless paper chase, or leaving processing and storage to computers. We'll make decisions based on the understanding that everyone in the industry participated in building the Preliminary Specification. We'll also understand the data sources and disposition. Until this is completed there is no use in discussing Machine Learning or Artificial Intelligence. They depend on the data and information they have access to and as noted garbage in, garbage out. 

Production data is the most interesting challenge and we have set out to engineer the appropriate solution in the form of the Material Balance Report of the Preliminary Specification. For the upstream oil & gas business, the Joint Operating Committee can balance volumetric activity, gathering, processing facilities, pipeline, tank car or truck deliveries, etc on the basis of our Material Balance Report. It is well beyond the scope of what one producer can undertake as the cost would be horrendous and the value would be quite limited. On an industrial scale however it makes sense and is the foundation of critical value generation. This is a result of the specialization and division of labor between people and computers. Instead of feeding differing systems with the same data and occupying our time reconciling these we can engineer the appropriate solution and establish the appropriate roles for people to pursue. Roles such as enabling automation, innovation, leadership, integration, negotiating, financing, observing, reasoning, judgment, thinking, planning, ideas, researching, collaborating, creativity, issue identification and resolution to name just a few.

Field Data Capture

Could this be the area of focus in terms of the implementation of the Internet of Things and the rebuilding of oil & gas through implementation of the Preliminary Specification? SCADA systems have worked well for large, integrated producers and independents. In my opinion, their costs are excessive and the technology is nearing its end of life. Field Data Capture is critical to capturing production data. It is the foundation of securing production data in an unimpeachable form. However, how do they survive in a world of Swarm networks and the Internet of Things?

It will be a matter of perception whether I’ve opened Pandora’s box or the world of opportunity. The reality is with much of the acceptance of the Preliminary Specification. We stand at a crossroads where bureaucracy rules and their domain crumbles. They’ll continue to fight for the last few pennies of value they can extract at whatever cost to others. However, we have to move forward. It is this vision, as incomplete as stated here, and more broadly articulated in the Preliminary Specification itself that needs to be undertaken.

Resource Management

In the Operations Management module, People, Ideas & Objects proposes that producers' engineering and geological resources be deployed toward their strategic and tactical goals. Whether it be in any one of the three main subsections of this module, Producer / Joint Operating Committee Operations, Performance Management or Resource Management, how and where these people are deployed and their activities can be managed, monitored and controlled through this module. This is the purpose of the Operations Management module of the Preliminary Specification. We are not replacing what exists in the marketplace, we are rebuilding the oil & gas industry for profitability and performance. Therefore what is done today should be seen as redundant. It has failed and we are rebuilding the industry in this vision.

The Operations Management module is a senior management console enabling producers and Joint Operating Committees to manage their operations. Our system will collect, store, and make available financial, operational, and technical data and information of the producer and its Joint Operating Committees. Although much is discussed in the marketplace about data and information and their respective values. Not much is discussed about the disparity of sources within these organizations, the quality of the data or how it’s used. It's also not discussed if it's managed appropriately. The Preliminary Specification, overall, should be seen as an opportunity to begin the process of objectively standardizing, organizing and implementing the data and information of these organizations. Only then could value be discerned from these sources. After all, who knows? Officers and directors may have made excellent decisions, but they used flawed data.

The tools People, Ideas & Objects, our user community and service provider organizations have included and developed in the Operations Management module of the Preliminary Specification. These tools include Work Orders, AFE, Job Orders and others. Become available to invoke authority and fulfill management's responsibilities. These form the basis of the Operations Management sub-modules. To consolidate the interface of information and tools necessary to effectively operate their domain of responsibility. This is to document these and ensure compliance and reporting to regulatory authorities is handled.

It’s pertinent to reiterate two distinct types of information: the producer's domain and the Joint Operating Committee. As we’ve noted elsewhere in the Preliminary Specification, producer data and information is predominately proprietary and confidential to everyone inside of the producer firm. It is tightly controlled within the firm. The Joint Operating Committee contains information that is predominantly public and any proprietary information is shared between the producer participants of that property. The use of Oracle Cloud ERP provides assurance that the architecture of how all this information and data is stored and shared meets these requirements. It also meets North American regulatory requirements. Security levels are among the highest in terms of Oracle’s capabilities and capacities for its Oracle Autonomous Database. Their Java security model establishes it as the most secure development environment since nothing can be run outside the Java Virtual Machine. Part of our user community tasks is to define a hierarchy of roles and responsibilities that define access privileges to data. Producers can assign the appropriate roles to appropriately authorized individuals to read / write those data elements. Compared to other vendors these security features may seem redundant and more trouble than they’re worth, however they provide comprehensive coverage. Oracle’s commitment to security continues as their firm uses Oracle products internally in a practice known as “eating their own dog food.” Please review the Security & Access Control module of the Preliminary Specification and the unique attributes we introduce and resolve there.

OCI Operations Management, Part IV

 Petroleum Lease Marketplace

Petroleum Leases are the legal foundation of producers' and Joint Operating Committees land & asset base. And therefore a distinct element of their competitive advantage. As with our other two marketplace modules, participation within our virtual marketplace of Petroleum Leases is of interest to producers and Joint Operating Committees. Those people, vendors, governments and producers that operate within this marketplace are actively creating the data and information represented in the Petroleum Lease Marketplace module. Through the Operations Management module, the producer or Joint Operating Committee can engage in this marketplace to exercise their strategy and employ their competitive advantages. It is here that operations and participation within the marketplace can be enacted with the decisions and actions they deem necessary. 

The module organizes unimpeachable, standardized, objective, business, operational and technical data into one location. This is for making decisions and taking appropriate actions. There are many sources of information both public and private scattered throughout producer organizations. The same data resides in disparate systems and accessibility is not always available as expected. This module is to eliminate redundant and / or incorrect data being produced. This is where the right people have access to the right information, with the right authority at the right time. This is at the right location and on the right device. To approach this from a system wide perspective of the industry, where each individual producer's makeup is fundamentally unique, with different systems, containing different information, serving different needs would be an impossibility. What is similar in this Operations Management module is that the data, information and systems needs of each producer are all consistent. This is not part of their distinct competitive advantage. Therefore to approach this from a rebuilding of the industry perspective as People, Ideas & Objects et al are. Standardization of data and information, but also systems becomes a possibility that would otherwise be unattainable and certainly untenable. A rebuilding that uses the industry's administrative and accounting resources on a shared and shareable basis. Where the costs to build this infrastructure are shared across the industry and standard, objective systems are available in return.

Which brings us to the larger question of what People, Ideas & Objects are doing? What is necessary to mitigate oil & gas issues? What is needed to resolve the high overhead costs of the industry? What is necessary to present a platform that the industry needs to rebuild itself into the dynamic, innovative, accountable and profitable industry it is supposed to be? Ensuring that North America achieves profitable energy independence everywhere and always. This is certainly not liable to be done based on what the systems approach has been in the past. And to further that point, what is operating within the industry today that can be considered valuable and worth saving? An industry that has destroyed itself. The arm’s length distance that we can maintain by making the Preliminary Specification is the necessary rebuilding of the industry into the dynamic, innovative, accountable and profitable industry that we need. It will be much simpler and quicker to do from a clean slate. Uncontaminated by its past failed culture and legacy of “muddle through.”

From my perspective active producer participation is not an option but there will be many who may choose not to participate. Whether that is individuals or producers they’ll have their reasons and we can’t please everyone. If they’re towards the end of their career or their firm is facing difficulties it would be understandable. What we’ve done is introduced mechanisms where everyone can participate and yield some monetary benefit as a result of their participation in this effort. From our Profitable Production Rights, our user community and their service provider organizations, producers attain far lower overheads through the sharing of administrative and accounting infrastructure through our Cloud Administrative & Accounting for Oil & Gas software and service. Secondly, they’ll have our price maker strategy ensuring that the marginal cost of any production is covered. To produce only profitable oil & gas production, everywhere and always. Each of these has substantial monetary and value benefits to participating producers. Participating in benefits both the oil & gas and the Information Technology industries. Alternatively what reason will be provided to producer investors as to why a producer is not involved in enhancing organizational profitability? And what alternative investment are they proposing that provides a better return on investment?

Therefore the Operations Management module is the core of where a producer can manage and implement their distinct competitive advantages of their land & asset base and coordination of the markets of earth science & engineering resources. This demands that both feet be placed firmly in this future so that the sinking of the current industry doesn’t pull everything down with it. To hedge one's bets or to await the results of others' efforts may be possible. However, I think those producers that hedge may be left behind as the industry's trajectory accelerates. Those that hedge or wait may not comprehend the new dynamics, its next iteration or compete with those that participated. 

To suggest that a wait and see strategy might be appropriate to determine if this initiative is successful is a mistake. There won’t be anything that will or could be tried again. Officers and directors of the producer firms have left it far too long for me to establish the Intellectual Property of the Preliminary Specification as the only viable option within the industry. After decades, 2023s natural gas prices have proven they have no alternative plans and no idea what it is they’re even doing. Any future initiative will need to avoid the Intellectual Property contained within the Preliminary Specification and its derivative works. Time has been consumed that could have been used more productively. All due to their “muddle through” and “do nothing” strategy and operating procedure.

Profitable Production Rights

As with the service industry experience during COVID, producers have shown their understanding of business extends to the closest group to them that has money to cover their costs. At one point the service industry became the preferred choice and was hollowed out by producers not paying them for 18 months. SLB and Halliburton left the continent to pursue global opportunities. Domestic suppliers were relegated to cutting up their equipment for scrap metal and selling horsepower to other industries to pay their bills. Investment capital and banking are foreign concepts in the service industry as one could imagine. The producers' reputation has been sealed by this bureaucratic configuration. The need for capital in the service industry will have to be undertaken by them on the basis of "producers broke it, producers will need to fix it” out of the goodness of their hearts, philanthropically. This was the experience of ERP systems vendors in the early 1990s. And since then the oil & gas ERP industry has been unable to raise capital as we can't prove how earnings could come about with producers operating in the manner that they do. 

People, Ideas & Objects have always sourced our revenues from oil & gas production. This has been a futile exercise that we’ve failed to overcome as we actively disintermediate the industry. The upside has been that we’ve proved that the industry has existential issues associated with the current organizational structure and management. And the only way forward is to stop using today's methods. The Preliminary Specification is the only oil & gas specific ERP application proposed to be built on a tier 1 provider, Oracle Cloud ERP. It is distributed to all producers through our Cloud Administration & Accounting for Oil & Gas software and service. Therefore novel methods of funding need to be developed to finance the development of the Preliminary Specification to build it. Profitable Production Rights maintain the direct source of proceeds from oil & gas production. 

We therefore developed the Profitable Production Right which provides its rights holder with the ability to license a producer with exclusive access to the People, Ideas & Objects et al Cloud Administration & Accounting for Oil & Gas software and service for one BOE/day. Profitable Production Rights hold exclusive access to these services as they finance and build the facility. We believe that the Preliminary Specification provides Profitable Production Rights holders with two advantages. To participate in the oil & gas and IT industries simultaneously by providing access to the Preliminary Specification. This is the only system that offers the means to produce oil & gas in North America profitably, everywhere and always. It’s not enough to own the oil & gas asset anymore, it's also necessary to have access to the software that makes the oil & gas asset profitable. Secondly we believe that as a result of our Intellectual Property and the market situation we are the only system alternative that has identified these issues and built a solution to them. Therefore, Profitable Production Rights gain a material value proposition in the form of a production right. This allows a producer to have the contracted boe / day processed through the Cloud Administration & Accounting for Oil & Gas software and service. Only Profitable Production Rights owners have access to the software and service. They can license, transfer, assign and market their Profitable Production Rights based on the market established for those rights. Rights holders will negotiate with producer firms their share of this value proposition.

It is therefore imperative that each producer in their Operations Management module has the means to secure the appropriate amount of Profitable Production Rights in order to manage their production profile. This will be part of the Petroleum Lease Marketplace section of the Operation Module as an element of that market. 

Areas of Mutual Interest

Defining the producers' or Joint Operating Committees agreed to commitments in terms of their Areas of Mutual Interests in graphic form. A producer can monitor and control their land position with their working interest partners through the Petroleum Lease Marketplace. If an AMI is established in an area that is expanding they need to know what their obligations are and what the consequences of participation will be. 

Bringing these to the attention of those with the roles, responsibilities and authority in the Operations Management module from the Petroleum Lease Marketplace module is appropriate. By maintaining operational control with high-quality, unimpeachable information on future obligations and opportunities, producers will not be subjected to unwanted consequences. 

Lease posting, bidding, rentals etc.

What is the status of the Petroleum Leases held by producers? Although not an active part of the lease securing or management processes. Providing unimpeachable data and information about the producers' land holdings is necessary for a clear understanding of their competitive advantage. 

Furthermore, access to public land information will be available to producers. Determine the land position of others, what are the posting and bidding positions of adjoining lands to the producer properties. In addition, what are the opportunities in areas of general interest for other producers? 

Market Acquisitions and Divestitures 

What would it take for our user community and their service provider organizations to build a market for all publicly announced properties and divestitures of firms and agents in the industry? To have this data and information organized as a single source of searchable information. This is where discovery, serendipity and spontaneous order would bring about new opportunities on top of what’s already available and conducted in the industry. As a shared resource the robustness of this service would be exceptional. What could be undertaken from a systems development point of view by one individual producer would not be worthwhile as the costs would outweigh the benefit and make the expenditure uneconomic. Spontaneous order and serendipity need to be restored to increase industry dynamic. When people find one another through sales and purchases that were previously unknown, more business and innovations will develop. New markets can be created and value generated innovatively.

Performance Management

To resolve many of the difficulties in oil & gas today. It is necessary to add financial performance based on the actual, factual accounting information of the property. This is in addition to the operational and technical data aggregated within this Operations Management module. Delivering it to decision makers within producer firms and Joint Operating Committees. To be able to rely on this information as the undisputed truth of the property's performance will add clarity and precision to industry decisions. With the implementation of the Internet of Things (IoT), as discussed earlier in this module, monitoring and controlling operations will be considerably more remote. Therefore, based on the decisions made from these three distinct sources of information, the producers will be able to become dynamic in ways that were never imagined before. 

Partnership Accounting

There are two distinct modules based on accounting within the Preliminary Specification. Partnership Accounting and the Accounting Voucher are used to report for the producers and Joint Operating Committees, and to capture data and transactions. The two critical aspects that differentiate accounting between what is done today and what is proposed in the Preliminary Specification are that financial statements are provided for each and every Joint Operating Committee and overhead costs have been converted to variable instead of fixed. These financial statements are based on the actual costs of the property. They include an allocation of capital in the form of depletion that allows the property to compete for capital on the North American capital markets. Secondly, overhead is the actual overhead incurred by the property. There are no overhead allowances as the Preliminary Specification has converted the producers' fixed costs of accounting and administrative capacities and capabilities into the industries' variable costs of accounting and administrative capabilities and capacities. Variable based on profitable production. Providing the producer with the ability to shut-in any unprofitable production, as determined by the detailed financial statements for the property, which if it is shut-in it will incur a null operation, no profit but also no loss, to maximize their corporate profitability and achieve many other monetary benefits.

What may become obvious to many readers is that this is a different environment for accounting resources. We no longer just record transactions and report on them. If we refer back to the beginning of this module's description we find that the “pull of data” and “push of instruction” from the Internet of Things will have severe implications on oil & gas accounting. The volume of data will be unprecedented at any point in the industry's history. If we’re to obtain the benefits of automation and turn the computers to begin working for us then we’ll need to grasp this opportunity on a holistic scale and implement it broadly. Not everyone fits into this redefinition, however the future of the dynamic, innovative, accountable and profitable oil & gas industry depends upon it. 

This vision cannot emerge spontaneously. There is no such thing as spontaneous order in a world where software and global markets operate. The Information Technology infrastructure exists and businesses and industries must ensure that they implement and realize the benefits. Otherwise others who can operate in this environment will leverage the opportunity to their benefit. As a result of their obstinance, the producers' officers and directors have already lost all Intellectual Property rights related to the People, Ideas & Objects Preliminary Specification. We are the only ones capable of providing North American producers with the most profitable means of oil & gas operations. How else could anyone do so? It would take, as I did, a decade of research to figure out another method to do so. Whoever would have the additional difficulty of avoiding the Intellectual Property within the Preliminary Specification. The fun part comes when officers and directors' indifference persists for another dozen years or more. This is to make sure their investors have nothing left to lose.

Financial Statements

For purposes of the Operations Management module the producer will be able to view the makeup of their organization from any perspective they need. Having the ability to aggregate the specific Joint Operating Committees they desire to get a more holistic view of the larger asset to evaluate. These Financial Statements will enable the user to analyze the costs incurred against what’s planned and expected from their operational and technical sources of information. Reconciliation of these three sources of data and information may lead to previously unknown unknowns. 

While marginal commodity prices may occur these financial statements would show the progression towards any unprofitable operations. It therefore provides a window for the Joint Operating Committees to determine when the threshold of potentially falling into a period of non-production due to the lack of commercial operations begins. As a result of the early foresight provided, those who may have to shut-in production will be able to examine their costs and determine with these modules three sources of data what a creative and appropriate plan might be for the property. To return it to profitable production by increasing its production, reducing its costs or enhancing its reserves. Limiting the time the property is shut-in and providing the time to more effectively plan and consider what may be the most effective method to return it to production. 

Pro-forma Worksheet

Sketching out a what-if scenario based on the actual historical situation is the general purpose of any pro-forma worksheet. "What if we changed this” and would that make a material enough change to make the property commercially viable again? Will provide historical data that sets the scenario on a factual basis that will ensure that uncertainty is eliminated. The implication of any changes to the financial statements can be difficult to understand in the full scope of comprehensive operations. This is due to the pro-forma following the accounting methodology used in the preparation of the financial statements. The implementation of any pro-forma changes will follow and show the full implications of these accounting methods and therefore mitigate any surprises that the accounting world springs onto its users. 

The Partnership Accounting module provides comprehensive accounting information. Whether it's Oracle Cloud ERP related information or People, Ideas & Objects' oil and gas integration. This information is available to authorized Operations Management module users. It is structured to provide the producer firm's performance and drilled down to the individual Joint Operating Committees or any combination of those. I hesitate to suggest that this information can be catered to in revised formats that meet any specific user's needs. That runs counter to its purpose. We strive to represent financial performance from the perspective of capital markets. Having ad-hoc reporting would be advantageous if it did not distort financial performance to make things appear better than they actually are. Therefore, Operations Management modules users must have their requirements addressed by our user community. This is to verify that they’ve implemented and prepared the software and services they wish to see, as well as to ensure that financial integrity is maintained in any ad-hoc reporting. In any scenario, capital markets will be the priority for the property's financial performance.

OCI Operations Management, Part III

  Producer / Joint Operating Committee Operations

It is through the Producer Operations interface of the Operations Management module that the user can access the aggregate data of the entirety of their interests in their various Joint Operating Committees. This view contrasts with the similar interface available when the user drills down to an individual Joint Operating Committee. It is here that we see the two distinct and operationally diverse perspectives of how the Operations Management module prepares for both producers as corporations and as participants in a Joint Operating Committee. 

Access to the Operations Management module within the producer would be tightly assigned to those concerned with profitability everywhere and always in their operations. Exposure to the firm's data and information contents under Producer Operations shows the majority of the Preliminary Specification modules are reported through this portal view. Populating the appropriate decision makers with actual, factual data and information from the business, operational, science and technical domains. Based on these factors, determine what decisions need to be made, when and how they need to be implemented to achieve and maintain profitable production.

Please note that People, Ideas & Objects have determined that the producer firm's data and information demand a higher security classification than the Joint Operating Committee does. The difference is that producer information is restricted to them, and only to a small subset of designated, authorized individuals. The Joint Operating Committee often deals with publicly available information and proprietary data shared among Joint Operating Committee members. It is recognized that Joint Operating Committee information will reflect the gross capital and operational expenditures and revenues of the property. In addition, it will reflect only the specific producer's interest share of those costs and revenues. 

People, Ideas & Objects have been critical of the fact that “recycle costs” and independent engineering reports are relied upon far too heavily to make business decisions. However, what would they use when business information is more corporate in nature? Information that reflects estimates of overhead costs and does not represent capital costs allocation? Combining the producer firm's business, operations and technical data, information and resources is needed. This is to resolve the issues that have manifested themselves in the damage and destruction caused. 

If there is a culprit in this it is the inadequacy and poor quality of accounting data and information, producer ERP systems and the organizational structure. This is primarily a product of the 1960s. And as we’ve repeatedly stated, the obscure and opaque nature of this has been a deliberate and orchestrated by producers' officers and directors. This is for their personal financial advantage. When such damage is done to an industry, where nothing is done to remediate these issues, where the calling is to muddle through, where only scapegoats, dishonesty and blaming are provided and the one specific group who have the fiduciary responsibility, authority, accountability and resources to deal with the issues. And it is only that group that benefits financially over all others? As a member of that group, what level of accountability would these officers and directors seek to instill within the organization they’re responsible for? Revealing their skeletons would never happen.

We should take a moment here and understand that the source of this issue and the lack of accountability is the cultural means of oil & gas operations throughout North America. It is therefore going to be the point of greatest resistance in terms of pushback and force applied by the status quo. This is to maintain their turf. We need to note and understand the Operations Management module's significance. This is in terms of the need to forcefully amend this culture of oil & gas and eliminate what exists culturally today. This will be one of the points of greatest resistance during our Preliminary Specification development. McKinsey notes in the February 28, 2014 article "Change Leader, Change Thyself."

The Producer Operations function is the portal that brings together actual, factual, timely, and accurate information for producer firms. It is not the original source of this information. All of it is drawn from other modules of the Preliminary Specification, other systems of the producer firms, Joint Operating Committees and public sources. A source of undisputed facts about the state of affairs that can be relied upon and decisions based upon. It is a means to control operations through our Industrial Command & Control and IoT implementation. This is to take any actions necessary to remediate issues, capitalize on opportunities, innovate and ensure profitability. 

If we look to the future and the changes being implemented and opportunities created through the development and implementation of the Preliminary Specification. Which involves the Internet of Things, the Swarm network, and Oracle's comprehensive and mature technologies. The shared and shareable nature of service providers' administrative and accounting capabilities and capacities. Their implementation of advanced automation, specialization and division of labor. The challenging and difficult future that oil & gas faces in the next 25 years. We see the need for these changes first and foremost. Organization is needed to capture them. What we also see is an exponential increase in data volumes and an order of magnitude increase in complexity and risk. If oil & natural gas prices are subject to overproduction in early 2023, after all that we have been through, after all that is happening in the marketplace at that time, after all the assurances they had things under control, we find the Officers and Directors do not have any capacity, capability, willingness or desire to even admit they have an issue. Change is inevitable in some form. We can orchestrate it constructively with deliberate actions such as what People, Ideas & Objects et al describe. Or we can accept what foreign sources of oil & gas define as limits to our overall economy. 

When our service providers provide objective, standardized data and processes they provide industry with a method of measurement, understanding, assurance, accuracy and timeliness that would not be possible without them. As a shared resource the costs of the service providers will be substantially less than what is required to build and maintain similar internal capabilities for each individual producer. Standardized and objective administrative and accounting doesn’t affect producer firm competitiveness. It is the strategy, land, assets, and coordination of the market's earth science & engineering capacities and capabilities that will determine the producer's competitive nature. 

Standardized, objective data and information in the administrative and accounting components across the industry will help producers enhance performance and innovation on that shared understanding. In itself, this is necessary because standard, objective accounting indicates that a Joint Operating Committee does not produce a profit. The producer will know that it is in their best interest to shut-in any unprofitable production to maximize their corporate profitability, save their reserves for the time when they can be produced profitably, ensure the costs of their reserves do not have to incur the additional costs of any future losses, minimize their production and storage costs and remove marginal production from the commodity markets. That indeed their profitability assessment is based on the same standard, objective method that all other North American production is assessed under.

Financial Marketplace

The Operations Management module provides producer staff in all areas of the business access to the information they need to operate. It contains standardized, objective financial, operational, and technical information. Access to the necessary information may be limited here as the Financial Marketplace module, from the producer perspective, is more focused on the corporation's cash and financing needs. It is not, as conceived here, an accounting information module. There will be a greater role for this section of the module in the individual Joint Operating Committee sections as cash balances, inventories and cash calls require their information. The ability to execute transactions such as cash calls would be a feature.

As with the Resource and Petroleum Lease Marketplace modules, the Financial Marketplace uses the Preliminary Specifications Marketplace Interface. The Marketplace Interface is a virtual representation of these three markets in a simulation with individuals participating as avatars of themselves. Marketplace Interface fully supports conducting and engaging participants within various marketplaces. This is part of the ERP capabilities provided by the Preliminary Specification. The importance of the Marketplace Interface is not necessarily fully understood and comprehended at this point in time and place. I see this as an opportunity and medium in which people can engage with the full support of an ERP business environment available to them. Something that falls within the immediacy of a telephone conversation with another individual and a meeting arranged next week with all hands. The Marketplace Interface provides a more dynamic environment that fulfills immediate needs with support from ERP systems. 

The most valuable and relevant aspect of our Marketplace Interface is two critical elements of economic development. These elements are lost due to software and Internet deployment across the globe. Serendipity and spontaneous order cannot occur when participants are thousands of miles apart. With the Marketplace Interface, virtual real estate can be established by vendors and participants to demo their products and services. Participants at those demos may discover one another and find similar needs. Either provide feedback to the vendor to address their needs or innovate upon products different from what is demonstrated. They can however use a conceptual difference that the vendor has demonstrated in their own product of service. Innovation is iterative and the foundations of the organizations and facilities of those organizations are critical to the success and failure of their innovation efforts. 

Resource Marketplace

How are operations conducted? Who is available? Who is selected? These are the questions asked and answered in the Resource Marketplace module. Having a global view of the producer's operating environment the user will be able to engage tactically and strategically to ensure profitability is first and foremost in the minds of everyone involved including the service industry, within the producer firm, Joint Operating Committee and elsewhere.

The Resource Marketplace module has strong connections with both the Preliminary Specifications Research & Capabilities and Knowledge & Learning modules. The two modules are involved in the development of the producers' competitive advantages of their coordination of the markets earth science & engineering capacities and capabilities. And the deployment of those resources into Joint Operating Committees. To innovate efficiently. Thus, they don't repeat the same mistakes throughout the organization. For example, not everyone in the organization chases ideas. Resources deployed in innovation can only be achieved through tried and tested practices etc. 

Oil & gas has a resource constraint problem in the engineering and geological sciences that has been identified but remains unresolved. Currently, the Mind Trust is rapidly retiring and university intake is inadequate to replace them. There is the fact that each incremental barrel of oil & gas demands more engineering and geology to produce. The expectation that North America will sustain energy independence. Rebuilding and refurbishing demands technical resources. However, first we have to overcome the industry difficulties today. Engineers and geologists will be at the forefront of industry future and innovations. 

The Preliminary Specification resolves the issue in the following ways. Specialization and the division of labor are both the solution and the aggravating factor. To resolve the resource issue, specialization is the only method capable of satisfying the industry's resource constraints. That, we believe, will only lead to the point where each producer will be uncommercial in their attempt to maintain their just-in-time earth science & engineering capacities and capabilities. The scope and scale of these specialized needs will outweigh their commercial viability. It will therefore be necessary to establish specialized providers in the industry to fill out generic processes. These will be sourced as required by each Joint Operating Committee and incorporated into the workflow. The producer will become highly specialized in an area that they can build value for their land & asset base. And in addition, they will be able to deploy their capacity and capability as a highly specialized resource back into the industry as a service provider themselves. This will help to defer the costs of maintaining, enhancing and expanding that capability. 

It is in the Resource Marketplace module that we introduce the concept of Pooling the technical resources of all the producers in the Joint Operating Committee. Pooling is our replacement for the operator role. This will become untenable after the further specialization and division of labor necessary to deal with the shortfall in these resources.

Industrial Command & Control

Superimposed across the producer and service industry population are generic classifications of the roles and responsibilities of the professions involved in the exploration and production process. These generic roles, responsibilities, authorities and accountabilities can be assigned to those that qualify and can undertake that task within a producer firm or Joint Operating Committee. Using Work Orders and Job Orders, we can document the work, its assignment, and its completion. 

Additional features such as delegation of authority and other enhancements are included in the Industrial Command & Control system in the Preliminary Specification. Consistent with the method People, Ideas & Objects has chosen to deal with the resource constraints in the engineering and geological fields. The ability to augment and deploy a producer's or Joint Operating Committee capacities and capabilities through specialized resource markets is another stated use of Industrial Command & Control. 

AFE

The Authority for Expenditures (AFE) is the standard way of establishing budgets for capital outlays. It documents the approvals of all participants in the Joint Operating Committees and reports those expenditures based on the agreed-to budgeted amounts. Supplementals and other features are included in these processes. 

As with all the other processes detailed in the Operations Management module, these are dynamic in nature and populated with live data. In the business context, the user can easily roll back to reports representing the last accounting period or production month.

Work Order

The Work Order has a dual function and process defined and developed in the Preliminary Specification. The first role is to facilitate working groups within the producer population to conduct research and development on various science and engineering-based principles. These working groups have waned in the past few decades and will soon be needed in massive volumes to establish a higher level of iteration between the underlying sciences and technologies developed, and the market innovations derived from them which will then form the basis of new science, etc. Our Work Order provides the ability to create an ad-hoc organizational structure that is flexible enough to consider the various forms of contributions during participation in a working group. The aim of establishing these working groups is to manage them without the bureaucratic legacy that has defeated their purpose. When people who participate are audited for vastly longer periods of time than their participation.

The second role of the Work Order is directly related to the deployment of resources in the manner necessary for the producer. This is to acquire and deploy the engineering, geological and service industry resources necessary to conduct such work. To budget, record, accumulate and bill deployed resources costs. To source and coordinate the market for incremental engineering and geological resources.

There is a feature in the Preliminary Specification described in the Security & Access Control module. This feature defines the organization's Industrial Command & Control. It is here that the Oracle role system of their database is used to designate the authority and capabilities of each individual role and or responsibility. This is within the organization. It also defines how those are conducted. These roles and responsibilities are established and standardized industry wide through our user community. By adopting these in the Work Order, we can establish an organizational structure for these tactical organizations. This will be established by the producer firm’s or Joint Operating Committees deployed to complete a task. Cobbling together and assigning the appropriate roles, responsibilities and authority of the individuals during their tenure on the specific Work Order.

Purchase Order

This is an established method of purchase order processing that has existed for 75 years or more. Oracle Cloud ERP has facilities for these with the ability to be augmented as we need them to fit the oil & gas industry. Changes are included in the area of Joint Operating Committee capabilities which will include enhanced holdbacks etc.

Job Order

Our Job Order is another development in the Preliminary Specification. If we look at the Work Order from the perspective of sourcing and deploying resources, managing the budget and recording hours for internal and consulting roles being sourced. The Job Order is purely a tool to tactically document the execution of commands to fulfill operational tasks in an authorized manner. Action cannot be taken without a Job Order. A Job Order will be completed with the appropriate individuals informed of the job order and their designated authorities, etc. Based on its own email system, it manages only Job Orders and establishes their documentation and implementation.

General 

Lastly People, Ideas & Objects are user community-based software development. Extensive and innovative attributes can be developed as the need arises. They may include additional features, functions and processes that enhance the Operations Management module. I am only defining the broader picture here, not the specific details.