This One's Nuclear

 In 2009 natural gas prices in North America began to change on a barrel of oil equivalent (BOE) basis. Switching from its traditional “heating value equivalent” of six units to one barrel of oil pricing. Until January 2023 this restructured price varied between the high teens and low twenties in terms of oil prices. A 300 to 400% increase in natural gas price factors realized before 2009. Representing a fundamental breakdown in natural gas pricing in North America, and only in North America. In August 2012 People, Ideas & Objects published our Preliminary Specification. Included within that was our decentralized production models price maker strategy. This would help to restore the natural gas market back to a six to one heating value basis. And to suggest that oil prices since 2009 have been spectacular as to what caused the factor to expand would be incorrect. No one has earned real profitability in North American oil and gas markets. Particularly considering the high costs of shale development. A fact that even oil & gas producers' officers and directors agreed upon when justifying their excursions to the clean energy frontier. Stating “shale will never be commercial” etc.

During this time, LNG is being developed in the Gulf of Mexico, Australia and Qatar. This has done little to move continental natural gas prices in North America to global natural gas prices. January 2023 notes that natural gas prices have further deteriorated in North America. This is evidently as strong as in 2009. Pricing appears to have moved down further into the high twenties to low thirties per barrel of oil equivalent. 

In 2021 and 2022, we were provided with viable scapegoats from these officers and directors that small producers were overproducing to pay their interest costs. Therefore they had to consolidate their operations to deal with the issue. The result of consolidation appears to show that the smaller producers, as reasonably assumed, were not responsible for the further breakdown in prices. Were there other unidentified issues consolidation did not address? I will continue with my systemic chronic overproduction theory. Producers that know better due to the publication of the Preliminary Specification yet appear mentally constrained by their “muddle through” strategy. 

There is an obstinence and perseverance in the officers and directors class of North American oil & gas producers. The destruction of natural gas prices has been ongoing for 14 years, and the value that's been destroyed has been tragic. Rough calculations between 2009 and 2023 show trillions of dollars wasted. Wasted is the appropriate word to describe the actions of the officers and directors since they had every opportunity to deal with the issue. No one in the industry would disagree with this analysis. It is obvious and in plain sight everywhere you look. The officers and directors' only comment is that they've "muddled through” and will continue today.

In their defense producers will assert that natural gas is a by-product of oil production. The Permian is a field with significant associated gas volumes. This is typical of the “muddle through” strategy in which any viable scapegoat will suffice to prevent further thinking or action on any of their issues. Issues are not challenges. They only generate excuses to avoid action. What is clearly evident is that no thought has been put into this issue's resolution. LNG has expanded the export market however, Australia and Qatar are also leaders in this area and have no shale gas. Acceptance through “muddle through” has seen the United States produce 259.83 TCF of shale gas between September 2009 and September 2023. Canada's shale and conventional production numbers for the same period were 80.64 TCF. This is for a total of 340.47 TCF of gas volumes during the restructured pricing period. This does not include U.S. conventional natural gas volumes.

The severity of the pricing differential's tragic consequences is evident in September 2023. EIA reports prices for September 18, 2023. At Henry Hub prices were $2.77 (32 to 1 unit of oil), East Asian prices were $14.63 (6 to 1 unit of oil), Netherlands $12.61 (7 to 1 unit of oil). Observe how foreign countries have maintained the traditional heating value of natural gas prices. Assume that North American natural gas production does not have a differential between Henry Hub and East Asian prices. What would the value of natural gas produced in this period be? Interested parties could calculate the difference. The answer is in the mid single digit trillions of dollars. I cannot grasp the scope and scale of the destruction caused. 262 TCF shale gas volumes have been produced in the United States. Remaining reserves are estimated at 625 TCF. Would this be considered a wasteful use of an irreplaceable resource? Or am I mistaken in thinking this is a business?

History has some interesting lessons regarding oil & gas development in this past century. The following are quotations from Professor Richard Langlois' recent book “The Corporation and the Twentieth Century, The History of American Business Enterprise.”

Professor Langlois is correct in this assertion. I would add that the inefficiency of the hierarchy during the 20th century was offset by the tremendous mechanical leverage experienced first by coal, and later by oil & gas. Without that leverage would the hierarchy have been able to destroy market-based systems? With the decreasing trajectory of energy leverage, due to the time and effort over the past century to explore its full value, has this laid bare the hierarchy's inability to perform?

I often wonder how those oilfield pictures came about. Where wells were literally stacked upon one another. If someone was producing, you just moved a few feet next to them and started drilling yourself. That was how the industry started. 

And

Overproduction and collapsed commodity prices are inherent parts of industries' culture and heritage. Historically attempts to deal with overproduction have failed in every way. And it is assumed to be an unresolvable problem. However, what is clear is the connection between overproduction and collapsed prices. There is a culture today that suggests the “market” will somehow magically deal with any production a producer produces. Unaware that prices are the only information markets provide to market participants, and that producers are market participants. The price taker mindset is what oil & gas producers operate under. The Preliminary Specification institutes production discipline based on price-maker characteristics. Only when prices are high enough to generate “real” profitable production will incremental production be added to supply. This production discipline is further supported by the capital markets' lack of support for any producer not maximizing profitability. If a producer wants to continue producing unprofitably, they’ll have no support for their capital structure. Investors tell producers' officers and directors this today. And it is reasonable to imply that a “real” profitable operation will provide an officer and director with all the financial resources they could dream of. Yet they continue to ignore reality through their chorus of “muddle through.”

When a fundamental change occurs in the underlying oil & gas business. With the shift from conventional to unconventional drilling, oil & gas is moving from scarcity to abundance. To one of higher costs, massive reserves exposure, high deliverability and steep decline curves. There is a change that needs to be addressed in the business as a result of such a significant, dynamic change. Unaddressed, the business could suffer consequences that could eventually lead to larger problems. The Preliminary Specification was published in August 2012. Three years after the decline in natural gas prices due to overproduction and three years before the same issue became prevalent in oil. 

Australia, Qatar and the United States are 1, 2 and 3 in LNG export leaders. The United States leads. Australia was the first to expand its LNG capabilities to deliver gas to Asian customers. Due to some massive conventional natural gas discoveries prior to the shale era in North America. 75% of their production is conventional. I am unaware of what percentage of their natural gas production is associated gas. However, I would not expect it to be materially different from the United States. It is interesting to note that Australian producers realize the netback price on LNG exports. And there is a regulated price on the domestic market that is approximately 60% of the export price. 

To describe this next issue I’ll mix the maritime term of Free on Board (FOB) and the common oil & gas term of netback pricing. Netback pricing is used in the U.S. for most gas sales based on the Henry Hub sales price. Any production in the country is therefore priced according to what it costs to get that gas to that port. Transport costs etc. are deducted from the Henry Hub price to determine the local production price. This is not a hard and fast rule as contracts are subject to negotiation. Maritime Free on Board indicates the seller is responsible for shipping costs and title transfers to the customer at the destination port. In an LNG shipment situation a natural gas producer in the United States shipping gas to an Asian customer would realize the Asian price noted above of $14.63 and incur the costs of refrigeration and shipping the LNG (approximately $5 - $6 / MCF). Although $8 to $9 does not seem significant, the Asian price has been as high as $55 in the past year.

What’s behind “muddle through?" Is it cultural laziness, or as we’ve seen in every corner of our lives today outright corruption? You have a situation that has been evident since 2009. A solution since 2012. Many trillions of dollars in waste and lost commerce. A destroyed oil & gas business with no support for the capital structure and a service industry that doesn't trust producers. You have an eerily parallel business environment in Australia where producers realize the netback price of their Asian sales prices. And by regulation, they must sell domestically at a discount to the LNG export price. You have convenient excuses, blaming and viable scapegoats being tossed about in full harmony every time questions are asked. None of these hold up under scrutiny and are replaced by equally faulty and absurd talking points. What actions over this period could we point to to determine the source of this issue? My argument is, if Henry Hub was receiving $2.77 and Asia was paying $14.63, where is this money? There is no reason for North American producers to not have received it.

Losing your shareholders' trust and faith in 2015 would have been terminal for any business if not for oil & gas's capital intensive nature. What we have seen instead is the officers and directors' stern denial of any and all requests for remedial actions. Accounting shenanigans and other issues of the past are only enhanced by their lack of transparency, accountability and unacceptability. Producers record most of their costs outside of royalties and operations as capital. Inflating the balance sheet has the same effect on earnings when overcapitalization leads to over reported earnings. Then over reported earnings attract more investors and overinvestment occurs, leading to overproduction. This has carried on for more than four decades and extinguished all the value that was built in the industry before and invested subsequently. I have suggested that their poor accounting is supported by ERP systems that officers and directors have placed on starvation and second hand shoestring diets. Where no development has been made in decades, and the reason for the shrill response to People, Ideas & Objects. 

The one action I think we can point to of the officers and directors in the past years that identifies exactly what it was that motivated the “muddle through” to continue was: Their abandonment of shale, the claim it would never be commercial and their unanimous deep dive into clean energy without any shareholder resolution or discussion prior to these decisions. In ExxonMobil's case, they created a boardroom battle that "Engine No. 1" was unhappy with their environmental record and Exxon accommodated them immediately. Under the premise Exxon listens to their shareholders. In 2022 Exxon reported that over 70% of their shareholders voted against this position. Today, with oil prices higher, officers and directors are back in the oil & gas business. And expect us to follow their non-plans and non-visions.

What was this diversion about? Pursuit of the land of the absolutely unaccountable clean energy business under the guise of proving to teenagers they were clean energy warriors? Taking others' oil & gas revenues, built by others, and absconding with them for unauthorized, unaccountable spending? But they’re saving the planet! Destroying the careers of oil & gas workers by saying clean energy was the future and you’re yesterday’s news. It's absurd to take shale's advanced technologies and say they’ll never be commercially viable. Without a moment's thought about how to change the business to make it viable. Indirectly telling the service industry not to invest in equipment, staff or training. We don’t want it or need it unless you have a never-commercially viable and never-will-be-commercially viable solar panel. I can certainly criticize these for being some of the dumbest, hypocritical business moves I’ve seen. No question. The industry-wide unanimity between these officers and directors and their actions is disturbing. These officers and directors are so well practiced at getting on the same page about excuses, blaming, viable scapegoats, fundamental and unauthorized changes in the direction of the business. Which brings us to the question of this post. Is this leadership unaware or corrupt? There are significant financial losses of resources and cash in natural gas between Henry Hub, Asian and European markets. Where are these dollars today?

Some may argue that my argument should not apply to all natural gas volumes. And only applies to LNG export volumes. However in the Australian example, even with regulation they realize a large percentage of the export price on domestic sales. These are not prices that resemble what the North American producer accepts. The validity of my argument is the differential between North American producers' realized prices and what we could suggest is a price closer to the traditional heating value price of 6 to 1. During the period from 2009 to today, LNG may or may not have been available for some of that period. 

The value from North American natural gas production has not materialized. People, Ideas & Objects Preliminary Specification solves this well-identified problem. An issue that has resulted in absolute destruction. In this case, what’s its value and where is this money? Why hasn't anything been done about it? As a result of discussing and resolving these issues, I have been vilified and ostracized from the industry. Would it be fair if anyone wishing to innovate within oil & gas was forced to suffer decades of persecution before these officers and directors finally approved of their ideas? How will an innovative industry replace the damage caused by these officers and directors when they’re so easily able to stop anyone? Is the elimination of initiative and innovation one of the highest costs? Given the destruction they've caused, is this heavy-handed treatment by those unaware or culpable appropriate? What is the reason for its continuation? The process of turning this around will take time and effort. People, Ideas & Objects are decades ahead of anyone else in solving the issue, but that does not mean we should waste time.

This One's a Firecracker

 We have a few items on our list that demand discussion. The first will address the daily chronic leakage that seeps out of oil & gas producers. Officers and directors have received all forms of compensation in the past decades. These compensations honor their ability to mismanage their organizations and lose money at every turn. We see what these costs are as compliance and governance provide transparency. However, People, Ideas & Objects offer to audit producers' General & Administrative costs. This is to determine the cost of administering an oil & gas producer. We’ve had no takers for our no-cost audit offering and we assume it would have led to enhanced transparency and more comprehensive reporting. The reverse has been the case. Over the past few years I've questioned this issue many times. Why are officers and directors so protective of overhead costs that total just 1 - 4% of revenues? 

As we’ve previously pointed out, this activity of enhancing executive compensation has been carried out for decades. It’s not lost on producer firms' upper management. They see how it's done and how it could enrich them in similar ways. Perhaps they are thinking it will prepare them for an officer role in the organization. This has always been considered the entrepreneurial way and to an extent it is. However, if you want to test a person's entrepreneurial skills, it usually means they've left the oil and gas company. In the past few decades not leaving has become easier, and straddling the inherent conflict has become a science. And that is what we have. Employees who are in relatively senior positions are “affiliated” with organizations they control that contract with the individual's employer to conduct the tasks that would be undertaken in the marketplace of service industry firms etc. That the producers' senior managers can contract directly between their own firm and their employer is known in some instances and in some cases they’re not. Some of these relationships are sophisticated, with individuals merging their operations with others working for different producer firms. These may have been "friends" prior to the formal business relationship. They also have similar interests in market participants. Mostly to appear as arms-length transactions. 

I’ve hinted at these relationships in past blog posts and I’ll explain them in detail here. Today we show that all is not well in the senior managers' empire. As one of the few oil & gas opponents to this practice, I am in the minority. You are employed to build value for your employer. Not to siphon off shareholder value from related party transactions that benefit yourself. But that is the culture of the industry and suggesting otherwise is setting oneself up for failure and shame as you walk down the street. Therefore what do I have to lose? I only see upside from where I’m at at this moment.

Let's look at an example of a "Chief Engineer.” They own two companies that have several, probably ten employees, in the primary firm. The second firm is in its infancy. In addition to confusion about who you're working for in a meeting, who you'll invoice and whether you've already invoiced them for the contract must be clear in their minds. Conflicts of interest are difficult to manage at times. A slight slip up could be considered a criminal act if they billed the producer for work they already billed or for work they performed that was part of their job description. Such are the risks when flying at such heights!

Here’s the problem. Basically, you have to look the part. The big house, the cars, the second vacation home and the cash disappears faster than you can imagine. In addition to the recently born five-month-old, oil and gas doesn't look healthy right now, and those interest rates aren't helping. It was all smooth sailing. What have they done wrong? I’ve heard that this Chief Engineer, and this is an actual example, has been running around screaming at the people that work with them and in one case firing a fully qualified east Asian engineer that was asking “too many questions.” Going as far as calling them a “turd.” This is what happens when the circus is run by one showman in a tent that is not their own and doesn’t pay any rent at the facility because no one knows they're using it. One day it all crashes down. These are the kind of people that although they appear to have it all together, fall hard and never recover. Psychological problems will soon limit their future potential. The proverb says that when you “chase two rabbits, you catch neither.”

The problem is that this is not just one instance. There may be thousands of these situations occurring in the industry at the moment. It is these people that will be the “canary in the coal mine” that will cause the collapse of the senior managers' external organizations. Which carries into the producer organizations. Internal self-dealing results in loss of both internal and external capabilities of the producer that were believed to be secure. Everyone looking out for themselves for the past few decades will solicit no sympathy for these individuals. This will not motivate anyone else who has observed these antics over the years to redouble their commitment.

I would steer clear of this situation. The difficulties these people are facing are not something they’ve been accustomed to, have the training to deal with or have the cultural propensity to resolve. They’re business issues and there is no one to bail them out, if that doesn’t sound like a cliché yet. These were not businesses built on determination and perseverance. Based on my experience, I suggest they consider it a big black hole.

As the title suggests, this is a firecracker in terms of impact. Tomorrow we'll see what other weapons are available for use. 

OCI Profitable Production Rights, Part III

 Issues Involved in Profitable Production Rights Licenses

An Inconsistent Software Architecture to What’s Approved

People, Ideas & Objects are licensed as commercial rights holders to my Intellectual Property. It is the issue of Intellectual Property that is highest on the agenda for the status quo producer’s officers and directors. They’ve never accepted or recognized IP before. They are hesitant to set a precedent that contradicts their operational method. Intellectual Property is the means by which the software reflected in Cloud Administration & Accounting for Oil & Gas will be secured in terms of its value proposition and therefore its inherent asset value. And therefore how our value proposition is generated. As a result, we can generate development and maintenance revenue through the creation of these Profitable Production Rights License products. It will hold their inherent value. 

This software infrastructure falls under the category of a primary concern for the Profitable Production Rights Licensee in terms of securing leverage for their value proposition. This is wholly derivative of People, Ideas & Objects and its licensed Intellectual Property. The Preliminary Specifications seven Organizational Constructs include Intellectual Property as one of the seven constructs. Please review that section to understand the importance of IP in this community and the larger oil & gas industry.

What the status quo officers and directors of the producers are willing to accept and what is generally understood in the greater commercial marketplace in terms of software architecture is the following. That commercial software applications such as the Preliminary Specification as configured today. Should be provided to the marketplace through published Application Programming Interfaces or API’s. Open source software is preferred for its large community and free cost. Then the general software development environment would have the opportunity to augment the software accessible through these API’s in "creative and innovative" ways. Which sounds like an improved method of delivering software. And in an altruistic world that may be the case. What we need to do is understand the purpose behind the status quo’s desire and motivation to pursue this architecture. And compare that to what People, Ideas & Objects are doing with our private API’s of proprietary software accessible only within our licensed domain. 

By publishing an API for use as the status quo desires, People, Ideas & Objects would violate the terms and conditions of all of our user community provisions. In summary our license grants them the rights to uphold, secure and prepare derivative works. By publishing an API, as officers and directors expect, we would allow producer firms to access software code without paying for it. To be more specific, they’ll never pay for the underlying Intellectual Property and render our value proposition moot. This is due to the fact that on May 6, 2021, the United States Supreme Court issued judgment for Google against Oracle in their litigation regarding Google’s unauthorized use of the Java Programming Language. Citing that the use of a published API was “fair use” and not a violation of Oracle’s copyright. 

Producers would however gladly pay for any and all of the “blind sleepwalking agents of whomever will feed them” to conduct software development for them. We therefore can clearly see the motivation and argument of both sides of this fine point of the law. The status quo and People, Ideas & Objects are seeking to commercially secure what is rightfully People, Ideas & Objects' value represented in the Intellectual Property developed in the Preliminary Specification and elsewhere. People, Ideas & Objects use that value to orchestrate productive change in the industry and disintermediate the status quo. The status quo wants to stop that process and manage software development to maintain their franchise for another generation. They will compensate those involved for their time incurred, however that is keeping a critical aspect of the industries future in the hands of “blind sleepwalking agents of whomever will feed them” doing only what is instructed of them by the producers' officers and directors. We’ve chosen a different direction for the oil & gas industry's health and prosperity. 

What potential Profitable Production Rights Licensees may take from this is that the makeup of my holdings is evenly distributed between Intellectual Property royalties, People, Ideas & Objects earnings and the fees charged to producers through the Flexible Profitable Production Rights Licenses that I hold. I’m all in to ensure I benefit from a profitable and prosperous North American oil & gas industry as a result. 

Vaporware

Yes definitely, and we're proud of it. We’ve not committed to anything set in stone that needs amending through costly software redevelopments. We’ve maintained flexibility and financial independence that allows us to focus on the issues. People, Ideas & Objects are the financially unsupported, ostracized and vilified oil & gas ERP provider. We have taken all the flak the status quo officers and directors could muster. We’re still standing and can claim to be the only solution for industries' existential and organizational issues. 

We are vaporware in its purest form. Outside of the Preliminary Specification there is little other than our efforts and results in developing our user community. A process we began in 2014 and requires significant time to organize. Potential user community members have had the 2012 publication of the Preliminary Specification to review and understand the larger vision of how oil & gas will operate. And to spend time in their chosen area of expertise to enhance and expand on these concepts. In addition, they should determine what they can do to enhance the industry. During the first quarter of 2014, with the publication of our user community vision, potential members saw how they could affect oil & gas changes. Having the tools of an exclusive license to:

• Prepare derivative works of the Intellectual Property.
• People, Ideas & Objects software developers can only look to our user community members for input.
• Discretionary budgetary control.

We keep the results of our user community confidential and away from the destructive and envious officers and directors of the producer firms. This is to ensure our members remain safe in their current prosperous oil & gas positions. Working quietly and insidiously on both the future and the past, consciously and unconsciously.

Scope and Scale

The ominous nature of the Preliminary Specification has not been attempted in an ERP environment before. This is not a result of our ambition but the scale of the issue and the obstinate resolve over several decades by the producers’ officers and directors. Oil & gas is a critical part of our advanced standard of living. Has that been endangered? It’s difficult to say at this point, however the prospect of what producer officers and directors will be able to resolve dynamically, innovatively, in an accountable manner and profitably is not likely based on the culture of "muddle through." 

It is interesting to see that Oracle is undertaking a similar scope and scale in the U.S. healthcare system. Moving their proposed system from the existing facility-based focus to one where the patient is the primary focus. It is far more comprehensive in scope and scale than what we are attempting, in my opinion. And the current U.S. healthcare systems are isolated systems operating at each facility. Patients cannot aggregate their medical history from independent healthcare providers.

Are People, Ideas & Objects and Oracle’s Healthcare initiatives just a fad in terms of what ERP systems may experiment with? Or are they the necessary response to the demand for systems and organizations to move to a higher level of capacity, capability and organizational performance? Is this necessary for society to move forward? The success or failure of these initiatives will answer these questions. The lack of alternatives to the Preliminary Specification, the lack of time, and the sense of urgency dictate that People, Ideas, & Objects, etc., must succeed. And this will only be resolved when we all focus on rebuilding the industry on that basis. Where everyone involved in the industry has a part in making that success possible.

Assuming Oil & Gas Disintermediation is Necessary

Disintermediation is necessary in every industry. The ability of the structured hierarchy to survive and prosper in the future is beyond question as it is now functionally unable to perform efficiently or commercially at the level that society demands. Various forms of organization centered around the Internet offer innovative means to apply principles of value generation that the status quo cannot compete with. 

We can argue these points about whether the oil & gas industry needs disintermediation. People, Ideas & Objects assume that the current structure has failed comprehensively. This is not widely evident or shared, however concern is building that business issues are summarily ignored or “muddled through.” 

Another constant in the disintermediation process is the battle between those who seek to protect their status quo turf and those who seek to change. In North America, oil & gas producers' resistance is persistent to the point that their poor performance damages all aspects of the industry and associated sub-industries. 

Taking the optimistic side of the argument. People, Ideas & Objects consider this an opportunity not only from the industry disintermediation perspective. The extent and comprehensive nature of the damage and destruction demands that significant remedial actions be taken to restore the service industries' capacities and capabilities. And rebuild producers' internal capacities and capabilities regarding exploration and production activities. To restore the trust, faith and integrity in producers that will attract the investment community back to the industry. To ensure the industry and producers are provided with the most profitable means of oil & gas operations everywhere and always. In addition, the consumer is offered an affordable, abundant and reliable energy source. Therefore why would you rebuild the industry in the current failed method and not use the tools and methods available today that are proven to be successful in other industries?

OCI Profitable Production Rights, Part II

 What do Flexible and Profitable Production Rights Licenses earn?

What revenues are generated through a Profitable Production Right License? This would be determined based on the negotiated share of the present value of the differential comparing People, Ideas & Objects et al’s value proposition to the status quo. What that would be and how that would be determined would be a result of these negotiations between the Profitable Production Right Licensee and the producer firm. These contracts would then be managed on the licensee's behalf in the Oracle Blockchain database managing each specific BOE. 

Let's assume that the Profitable Production Right Licensees implemented a percentage of the oil & gas commodity price in their contracts. And for the purposes of this discussion, we will assume a range of rates between 2.5% and 5% of the commodity price. A range that consists of one quarter to one half of the “real” profitability of a commercial operation. An amount where the use of the Preliminary Specification ensures commodity prices are at least marginal, and therefore higher to ensure a profitable operation. A differential that has been of no interest to current producers who have left far more than that on the table for many decades. An amount that future producers would consider a cost of business in determining their profitability. That contract would earn if commodity prices were capable of providing the producer with a 10% profit from these prices. At a $100 price of oil, revenues of up to $5.00 per day or $1,825.00 per year. Assuming that the Preliminary Specifications decentralized production models price maker strategy rehabilitated natural gas prices back to their traditional heating value basis of trading. Natural gas would be at a commodity price of $16.66 and generate similar revenues to oil. The key to this argument is that these will be the costs that producers will incur to maintain their access to our Cloud Administration & Accounting for Oil & Gas software and services that provide them with the most profitable means of oil & gas operations everywhere and always.

The anticipated, expected or budget price of a Profitable Production Right License is $600 U.S. per boe. This is based on the current North American production profile which includes heavy oil production and People, Ideas & Objects budget. As we’ve discussed, heavy oil producers have their own ERP systems and may not be interested in the Preliminary Specification. However they are direct, net benefactors of the price maker strategy and therefore their production is assessed on the same basis as all other North American production. They are incapable of shutting down their production process, whose costs are consistently high and therefore will need to acquire Profitable Production Rights Licenses.

The cost of maintaining software development and our user community long term would need to be factored in when the Preliminary Specification becomes operational. This would not be material in my opinion. If we consider the $23.2 billion development costs of the Preliminary Specification in comparison to the gross revenues of the producers in 2021, our total software development and our user community costs averaged over three years would total 2.0% of a single year's oil & gas revenues. And post commercial release operational and incremental software development and our user community costs will be smaller. It is reasonable to estimate that 25% of the build costs or $1.9 billion per year will be spent. 

Assigning these overhead costs to Profitable Production Rights License owners would be an all-in cost of $32 / year / license. For clarity I’ll state that service providers' revenues are generated through their direct billings to the various Joint Operating Committees. These costs make up the Joint Operating Committee and producers' variable overhead costs and are not part of the Profitable Production Rights Licenses. The Profitable Production Rights Licenses will have no impact on the service provider's fee structure or billing. They will indirectly impact the producer's ability to access service providers through access rights to the software.

The basis of the long term support costs associated with owning a Profitable Production Right License is the support of software development and our user community. These are permanent industry-based capacities and capabilities. There will be times when the Profitable Production Rights Licensees contracted production may have been shut-in, suspended or abandoned. [Note: that does not mean there would be no overhead costs charged to the Profitable Production Rights Licensees for software development and our user community costs during these times. These overhead costs are fixed.] The important aspect of the Profitable Production Right License is that it is a contract with a producer to provide them with access to organizational capability to earn profitable production. It is the right to produce a barrel of oil equivalent and process it through Cloud Administration & Accounting for Oil & Gas software and service. And is therefore reconfigurable in terms of the production it represents. Profitable Production Rights Licensees won’t have the risks associated with oil & gas property ownership. Each Profitable Production Right License will have the exclusive right to process a barrel of oil equivalent profitably through our Cloud Administration & Accounting for Oil & Gas software and service. Granting the producer firm the opportunity to profit on a single barrel of oil equivalent. That Profitable Production Right License is transferable at the Licensee's discretion. The ownership that you gain by purchasing the Profitable Production Right is assignable, licenseable, leasable and transferable. Additionally there is no implied role for a Profitable Production Right License holder to be involved whatsoever in the day to day activities of the producer or Joint Operating Committee. The product is a license to Cloud Administration & Accounting for Oil & Gas. The producers alternative would be to continue using their current approach which tears the industry apart. 

Today’s producers' tactical management approach includes everything that comes into their minds. In the past few years we’ve seen $25 million in executive bonuses paid by Chesapeake the week prior to its bankruptcy declaration. It appears that bankruptcy is the means to deal with shareholders who have become too dissatisfied with management performance and is how producers can reshuffle the deck as it were. Profitable Production Rights Licenses circumvent these actions by having a clause that terminates the Profitable Production Rights License upon bankruptcy. Therefore freeing up the rights and maintaining value in the hands of the rights owner. Endorsing the purpose of Profitable Production Rights by separating ownership of oil & gas production from the right to process that production. This is done through organizations represented by Cloud Administration & Accounting for Oil & Gas. The Licensees could then engage bankruptcy trustees to reinstate the Profitable Production Rights License. This would be on terms that maintain independent ownership of the Profitable Production Rights License separate and distinct from the means of production.

Why and who would be interested in purchasing these Profitable Production Rights Licenses?

One of the purposes of developing People, Ideas & Objects Preliminary Specification and Cloud Administration & Accounting for Oil & Gas software and services is to generate the necessary producer profitability to deal with capital demands over the next 25 years. There is no other financing source large enough to support these needs. As producers, officers, and directors, past methods have failed catastrophically. Investors have stated unequivocally that they’ve had enough of these past methods and refuse to participate further. Continued obstinance by producers' officers and directors appears to be counterproductive with the pace and trajectory of industry decline accelerating. Oil & gas in North America has no future in its current configuration. Change is necessary to deal with marketplace issues and opportunities. Opportunities such as disintermediation through Information Technology and the other Organizational Constructs of our Preliminary Specification. Enhancing the industry culture through wholesale change. To ensure that producers achieve the most profitable means of oil & gas operations, everywhere and always.

The following are a number of different classifications of people that we believe would be interested in purchasing a Profitable Production Rights License. To provide software development revenues to People, Ideas & Objects and initiate the rebuilding process that oil & gas and all subsidiary industries need to undertake. 

Current, past and prospective oil & gas investors

Investors want profits and have not been rewarded for their efforts since 1986. They have experienced the same obstinate, protracted battle with producer officers and directors that People, Ideas & Objects have experienced. Their participation in the Profitable Production Rights License would provide People, Ideas & Objects with revenues to change their current and prospective shareholdings into dynamic, innovative, accountable and profitable oil & gas producers.

Our plan for the next few months involves investors purchasing Profitable Production Rights Licenses to ensure their representative production is handled. To secure their ability to process representative production through Cloud Administration & Accounting for Oil & Gas software and services. 

Current oil & gas employees

Everyone recognizes the personal risks of disintermediating an industry. It brings out the possibility that they're attacked and subjected to severe, unnecessary career consequences. The number of people who are of like mind to People, Ideas & Objects is significant in volume. I have sought to keep their information confidential for their safety and financial benefit. Our user community members are part-time positions. Their commitment will be required when service provider organizations are formed, well into software development. There is a desire throughout the industry to do something to deal with its issues and soon. 

Would the overall population of oil & gas employees and vendors participate in the Profitable Production Rights License? Ownership of a product such as these licenses provides an opportunity for people to participate in the industry. Having indirect value generated from oil & gas production is a risky proposition. With the transferability of the licenses to new properties and the Flexible Profitable Production License these risks are reduced. The leverage realized by these products is enhanced through the value proposition made available by the disintermediation of oil & gas.

Current Service Industry representatives

Who have a vested interest in rebuilding the service industry to rebuild their trust in the producer firms. Profitable Production Rights Licenses would motivate them to earn value in their chosen industry. Eliminating the oil & gas boom / bust cycle and its consequences, which are leveraged by producers to be experienced exclusively by service industry representatives. 

Motivation has been the primary issue in the service industry for the past few years. Faith and trust towards the producer firms will need to be rebuilt by the producers if they expect to continue with their production profiles. In a “you broke it, you fix it" mentality. Producers will need to recapitalize the service industry through active philanthropic rebuilding of its capacities and capabilities. Providing evidence that there will be second, third and more paychecks when producers destroy their businesses again. Something that field staff will know they can reliably base a career, family and mortgage upon, in what is currently the 21st century. Producer officers and directors should take these comments as an independent assessment of their past management.

Our user community and their service provider organizations. 

Their participation in these software developments proves their motivation for profitability everywhere and always. A Profitable Production Rights License would provide them with an incremental value-add from what they seek to produce for the industry. Securing additional motivation to provide the most profitable means of oil & gas operations, everywhere and always.  

Our user community and service provider organizations are derived from the general oil & gas community. Having direct participation in the production process is attractive to these people.

North American producers.

They’ll need to secure their production rights through direct purchase of a Profitable Production Rights License or engage a licensee to lease the incremental barrels they need to process their production volumes when the Cloud Administration & Accounting for Oil & Gas facility is operational. People, Ideas & Objects are satisfied that we are generating our revenues from direct oil & gas production, albeit indirectly.

“Muddle through” has consistency over time and throughout the producer population. We argue it has become the culture of the industry. In this transition to a performance-based culture this may be the start of a producer's competitive juices flowing. 

Oil & gas producers worldwide.

A way to profit from North American production without operational, financial or political risk. It can be done directly through the ownership of the Profitable Production Right as well as indirectly through the most profitable ways to operate oil & gas operations based upon consistent, marginal, global commodity prices.

The associated risks and issues of software and services development are addressed within a reasonable timeframe and budget. They assume the appeal of the Profitable Production Rights Licenses as explained at this point. All inherent risks associated with this product are mitigated or overcome. This implies a collective and collaborative effort by the industry to succeed. The scale of the issue demands such. Despite the fact that we are not there yet, I believe we are close to the point where everyone understands that collective and collaborative actions are necessary.

OCI Profitable Production Rights, Part I

 Introduction

People, Ideas & Objects are reinstating a modified Profitable Production Rights Licensing method of generating the necessary revenue for the development of the Preliminary Specification and our user community. Providing Profitable Production Rights Licensees with the unique opportunity to participate simultaneously in both the North American oil & gas industry and its ERP software markets. All businesses in the 21st century will soon be software businesses.

I’ve made a number of changes to the Profitable Production Rights License and better defined the opportunities for all concerned. It is a means in which the development of the Preliminary Specification can be undertaken and for licensees to hold the rights to control who will have access to People, Ideas & Objects software and our user communities service provider services in the form of our Cloud Administration & Accounting for Oil & Gas. I’ll restate here why participation in People, Ideas & Objects et al is valuable in the 21st century. 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 that makes all oil & gas assets profitable. 

Oil & gas producer officers and directors have proven they don’t care about oil & gas in their transition to clean energy. They have also declared that shale will never be commercialized. A capitulation of the oil & gas business others such as their investors and the service industry actively participated in and built. Oil & gas producer officers and directors have demonstrated they don't understand, need or know how to earn "real" profitability for over four decades. The oil & gas industry has a legacy and culture that cannot change and that is counterproductive to profitability and productivity. The first step to changing a culture is accepting the issue. Through their proven specious accounting methods and reporting, ad hoc ERP systems, and dysfunctional organizations, oil & gas producers officers and directors do not care about transparency. 

At this point in time what more needs to be proven that the North American producer is a failed organization? How many more chances will they get? Societal jeopardy is now in play with what I perceive is the industry's inability, over the next decade, to maintain shale deliverable volumes over the mid to long term. For example U.S. natural gas production from shale is almost 80% of total production. With 10,000 to 25,000 man hours of mechanical labor contained within each barrel of oil equivalent, producers' officers and directors' self-interest overrides all other concerns. With all that has happened between producers and investors since 2015, investors' expectations are clearly defined. How producers explain their unwillingness to invest in profitability and accountability is a mystery to me. 

I came across this statement regarding the Fifth Estate.

The Fifth Estate is a fundamentally different kind of power. It’s more difficult to consolidate than media, and more difficult to control than even our government divided by design. Its impact is also far more difficult to predict. This is because technology is above all things defined in terms of newness, which not only makes it disruptive of pre-existing power, but destructive of itself -- a sort of anti-power that only guarantees change. The true failsafe. Our ultimate reset. Tremendously empowering of tyranny in times of stagnation, technology is also our most powerful weapon against tyranny in times of innovation.  

- Edmund Burke

We’ve lived through a time when a transition occurred in the business community. Technology has disintermediated the old with innovative, highly productive, and value-generating business models. Over the past two decades the status quo has maintained control while everything in their business became distorted and value effectively destroyed. Since the 2008 financial crisis we’ve witnessed shale technologies become dominant however only minimal to no value has been realized as a result. I see this period as the last of the “tremendously empowering of tyranny in times of stagnation.”

The oil & gas industry is not only faced with its most challenging operational, financial and political future. These three challenges demand that innovation, entrepreneurship and the principles that have brought the North American continent to dominate the global economy be put forward to resolve the industry's difficulties. The status quo is not only incapable, it has chosen not to bother, shrugged its shoulders and moved on. It is therefore a time when “technology is also our most powerful weapon against tyranny in times of innovation.” The choices we make today are how we’ll perform in 2025, 2030, 2040 and 2050. 

People, Ideas & Objects believe the status quo has failed. Since 2015 they have unsupported capital structures. Have failed to remediate any aspect of these issues leading to their difficulties. Have deprecated their internal Work-in-Progress capabilities. Destroyed the service industries capital structures and motivations for employment. Their capacities operate at 25% of prior levels. The second half of 2023 sees all the basins in the United States in decline. And possibly most detrimentally, oil & gas industry leadership does not consider these concerns. Instead, they saunter off the stage into unrelated businesses involved in “clean energy.” Taking the oil & gas revenues, in an unauthorized fashion, which were generated by their investors and are the only source of financial capability available to fund the rebuild of this industry.

Producer officers and directors are organizationally unprepared to approach their most challenging future and have not supported any organizational development method. Leaving People, Ideas & Objects as the only alternative in the marketplace to their failed, archaic method. The only solution researched and reviewed. Based on performance that provides the most profitable means of oil & gas operations, everywhere and always. To build a dynamic, innovative, accountable and profitable oil & gas producer and industry. To ensure North America attains optimal economic prosperity through energy independence from shale commercialization. 

People, Ideas & Objects et al’s Profitable Production Rights Licensees own the keys producers will need to access our Cloud Administration & Accounting for Oil & Gas method of profitable oil & gas organization. Or, producers could choose to remain with the status quo. They could let that expire, and check what is available then.

Profitable Production Rights License

In terms of implementation, what we need is the ability to write each of the Profitable Production Rights Licenses onto a blockchain solely dedicated to securing the Profitable Production Rights License. We are fortunate to be able to do that through Oracle Cloud Infrastructure and Oracle Autonomous Database. This is due to their recent development of the Oracle Blockchain Table as described below. This will be an Oracle database within the Preliminary Specification that manages these Profitable Production Rights Licenses by controlling the rights holders' contract. This will allow the contracted producer access to People, Ideas & Objects software and services. And it will manage licensee revenue and expenses on their behalf. 

Any assignments, sub-leases or transfers of the Profitable Production Rights License do not override or delete the original purchaser's transaction in the database; they will write another block on the chain, or row on the instance of the Oracle Blockchain database. Profitable Production Rights Licenses are aggregated through its serial number. This is done to determine all the associated transactions, assignments, its current ownership, and licensing of its production right to which producing Joint Operating Committee. 

Ownership and control of the encryption key to access the Profitable Production Rights record database will be held by the Profitable Production Rights licensee. This database will store the production contract they execute with the producer. Producers will be billed based on the Profitable Production Rights Licensees contract. Where the licensee holds access rights to what we believe will become the only means to profitably organize North American oil & gas exploration, production, administration and accounting. 

Blockchain tables are append-only tables designed for centralized blockchain applications.

In Oracle Blockchain Table, peers are database users who trust the database to maintain a tamper-resistant ledger. The ledger is implemented as a blockchain table, which is defined and managed by the application. Existing applications can protect against fraud without requiring a new infrastructure or programming model. Although transaction throughput is lower than for a standard table, performance for a blockchain table is better than for a decentralized blockchain.

A blockchain table is append-only because the only permitted DML are INSERT commands. The table disallows UPDATE, DELETE, MERGE, TRUNCATE, and direct-path loads. Database transactions can span blockchain tables and standard tables. For example, a single transaction can insert rows into a standard table and two different blockchain tables.

It should be noted that Oracle Blockchain Database is not a pure blockchain implementation. It does not distribute a blockchain to other servers for validation and verification in the event of a suspicious transaction. It is focused on higher transactional performance than traditional blockchain technology can provide. A necessary requirement for our purposes. It is managed by the Oracle Autonomous Database and will act as a gatekeeper for our Cloud Administration & Accounting for Oil & Gas. In other words the data is immutable which is the feature of all blockchains. We are using it to ensure Profitable Production Rights Licensees have security of their rights. Each North American oil & gas producer will need to secure adequate Profitable Production Rights Licenses so that their organization can access our Cloud Administration & Accounting for Oil & Gas software and service to obtain the most profitable means of oil & gas operations. People, Ideas & Objects believe that once constructed there will be no other competitive options for producers to organize themselves profitably.

Flexible Profitable Production Rights License

Oil & gas production can be unpredictable at times. Fields can and do decline, with shale being particularly variable. There is market demand as we’ve seen with an overall decline of 25% worldwide consumption during COVID. Although it is unlikely to happen again, it forms a baseline. Add to this the variability that the Preliminary Specification introduces with the decentralized production models price maker strategy. Production volume variability may become more significant and difficult to predict. How would this be manageable with the Profitable Production Rights License? This would be unable to earn revenues for at least a month or more, yet cover the associated fixed overhead costs attributable to their license(s). (Predominately Oracle software license costs associated with Cloud Administration & Accounting for Oil & Gas software and services.)

Therefore we are introducing two categories of Profitable Production Rights. We have described one category. The Flexible Profitable Production Rights License will be assigned 25% of the total. These will absorb production variability up to 25% of all production. Each producing property will automatically be assigned 25% of the Flexible Profitable Production Rights License to offset any production decline. Therefore the Flexible Profitable Production Rights License indemnifies Profitable Production Rights License owners in case of variable production volumes up to 25% of a Joint Operating Committee total production volume. 

A Profitable Production Rights Licensee would therefore maintain their revenue streams in cases of production variability up to the extreme volumetric declines we've seen in this past decade. As production is being shut-in due to lack of profitability, this is anticipated to be a small percentage of North America's total output. Therefore if the shut-in production is attributable to lack of profitability and meets the following conditions 

The property is currently being reworked to return to production. The defined purpose of the Preliminary Specification. 

As a result, the Flexible Profitable Production Rights Licensee will assume those volumes as part of their overall 25% allocation. It will absorb the revenue loss from any shut-in production of those properties on behalf of the Profitable Production Rights Licensee assigned to the property. Abandonment or suspension of the properties' production would release all Profitable Production Rights Licensees to seek new production elsewhere. Until production deliverability in North America dropped 25% below the base production volume established for the continent. In this case, there wouldn't be a decline in revenue for Profitable Production Rights Licensees, only for Flexible Profitable Production Rights Licensees. 

The Flexible Profitable Production Rights License is not valued below the Profitable Production Rights License in terms of its purchase price when distributed. This is a result of the Flexible Profitable Production Rights License being fully acquired by me. I am reallocating the margins that are earned through People, Ideas & Objects., to Flexible Profitable Production Rights License consideration of 25.0%, 25% Intellectual Property royalty portion of the Preliminary Specifications budget and 25% for the earnings of People, Ideas & Objects. What I expect as a result of holding all of the Flexible Profitable Production Rights Licenses is to have a strong negotiating position when leasing these to producer firms that need to secure Flexible Profitable Production Rights Licenses for one quarter of all their production. Negotiations for the acquisition of Flexible Profitable Production Rights will commence once Profitable Production Rights are fully subscribed to each Joint Operating Committee.

What do Flexible and Profitable Production Rights Licensees earn?

Flexible and Profitable Production Rights Licensees are the exclusive customers of the People, Ideas & Objects Preliminary Specification and our user community service provider organizations. There will be no ability to access Cloud Administration & Accounting for Oil & Gas software and services that they’re building without the associated Profitable Production Right License in place to do so. Each Profitable Production Right will provide the means to process one barrel of oil equivalent / day profitably through this facility. Please note there will be an unknown period of time during development in which no revenues are earned and no expenses are incurred by either class of Profitable Production Rights Licensees. This would not preclude licensees from engaging producers to ensure production rights are in place. This would be prior to the commercial release of the Cloud Administration & Accounting for Oil & Gas software and service. Profitable Production Rights Licensees revenues are earned by charging producers access fees to efficiently process their BOE on a monthly basis through the Cloud Administration & Accounting for Oil & Gas software and services. How those are structured will be at the discretion of the Production Rights holders.

The methods used by producer officers and directors today have failed, and have destroyed what value existed in the industry prior to their administration and any subsequent investments made. They have not generated any value from the massive call on investors and are incapable of dealing with today’s issues and opportunities. Oil & gas producers have proven to be incapable of managing the business and are failed organizations with unsupported capital structures. Officers and directors today manage a capital intensive industry with reasonable cash flows that provide for only enhanced executive compensation. There has been and will be no change during their tenure. It is within that statement that Profitable Production Rights are valued. What is the difference between a truly profitable oil & gas operation and the one in the industry since the 1986 oil price collapse? Where the North American oil & gas industry would be competitive against all other industries for capital. That is the value Profitable Production Right Licensees offer the producer firm. Profitable Production Right Licensees leverage their revenue stream through the People, Ideas & Objects value proposition. The exclusive right grants the dynamic, innovative, accountable and profitable oil & gas producer the ability to organize, operate and provide for the most profitable means of oil & gas production. The methods and means of operations are described in our Preliminary Specification. They cover the full scope of exploration, production, administration and accounting from start-up to integrated producers.

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.