The Preliminary Specification Part XXXV (R&C Part III)

In our last post we went through the four points from the McKinsey article as to why we should use the Research & Capabilities module for the long term perspective of the innovative oil and gas producer. In this post I want to revisit the first point of that article and highlight the significance of the opportunity that is presented by separating the long term perspective into the Research & Capabilities module, and the day to day into the Knowledge & Learning module. In the McKinsey article it is noted;

The first design principle is to clarify the reporting relationships, accountability, and responsibilities of the line managers, who make good on a company's earnings targets, for all other considerations will get short shrift until short term expectations are met.

By making the Joint Operating Committee the key organizational construct of the innovative oil and gas producer. By aligning the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee with the compliance and governance frameworks of the hierarchy. By providing an extension of the governance structure over the partnership with the Military Command & Control Metaphor. We have isolated the Joint Operating Committee as the day to day operation of the oil and gas producer. This frees up the remaining portion of the producer to concern itself with the long term value generation of the firm.

Recall in the last post that these Joint Operating Committee’s are autonomous in the sense that they are focused on providing the greatest performance. They are driven through the Performance Evaluation module that allows them to determine where and how they can build the greatest value each month. Because they are operated by the partnership, which is motivated equally by financially gain, the producers will have faith that the “line managers will make good on a companies earnings targets.”

The Research & Capabilities module is looking at the interests the producer has in any number of Joint Operating Committees. This number may total into the thousands. To concern themselves with the operational performance of each would be a daunting and impossible task. And based on the previous paragraph their involvement is limited. However, there may be systemic corporate similarities that can be applied to each that bring value to the overall producer firm. Systemic similarities that can only be seen from the perspective of the firm, and in the long term. These are where the business value can be generated through the use of the Research & Capabilities module. McKinsey notes;

Dynamic management and improved collaboration, as we show later, are better ways of accomplishing the purposes of these ad-hoc structures. A company that aims to streamline its line management structures should create an effective enterprise wide governance mechanism for decisions that cross them, such as the choices involved in managing shared IT costs.

It is through an iterative and collaborative approach to dealing with the various Joint Operating Committees that the users of the Research & Capabilities module is able to extract the value in the long term. By passing on new innovations or experiments for the JOC to try. The ability to influence any and all variables and to see any aspect of the firm and to analyze it is the domain of this application module. To define it as a set of fixed functionality will ultimately be the result of what the user community is able to provide, however, I am certain that they will also recommend that the application module remain open to analyzing any and all data.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification Part XXXIV (R&C Part II)

Yesterday we discussed how the Research & Capabilities module would be used to help build value by managing the transition from the hierarchy to the aligned producer organization under the People, Ideas & Objects software. Where the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee were aligned with the hierarchies compliance and governance. Making this transition will create opportunities for people to make changes to the work that they do in order to be more efficient and effective. What and how the software will do this little bit of magic is best described in a McKinsey article that is referenced in the Draft Specification.

In a four part recommendation McKinsey sets out in broad strokes what is required.

• Streamlining and simplifying vertical and line management structures by discarding failed matrix and ad hoc approaches and narrowing the scope of the line manager's role to the creation of current earnings.

The process of using People, Ideas & Objects software will achieve all of these objectives. By aligning all of the Joint Operating Committee and the hierarchies frameworks, imposing the military chain of command and having the financial interests of the producers drive the management of the Joint Operating Committee we are “narrowing the scope of the line manager’s role to the creation of current earnings”. These are the focus of the Partnership Accounting, Accounting Voucher, Petroleum Lease Marketplace and Performance Evaluation modules.

• Deploying off-line teams to discover new wealth-creating opportunities while using a dynamic management process to resolve short and long term trade offs.

These are the critical new roles that are being discussed in these “new” modules “Research & Capabilities” and “Knowledge & Learning”. Providing valuable insight to their users about the business that is above the day to day noise. Where the long term vision of the organization can be set, executed and realized through these two advanced software modules.

• Developing knowledge marketplaces, talent marketplaces, and formal networks to stimulate the creation and exchange of intangibles.

Within the Preliminary Specification, if we include the Research & Capabilities and Knowledge & Learning marketplace definitions, we have five marketplace modules in People, Ideas & Objects. Marketplaces are things that people will be doing more of in terms of participation in the future. Computers can assist, but again are generally very poor at making decisions, bargaining, knowing what to do, etc. The other three marketplace modules in the Preliminary Specification include the Petroleum Lease, Resource and Financial Marketplaces.

• Relying on measurements of performance rather than supervision to get the most from self directed professionals.

We have already had our first pass through the Performance Evaluation and Analytics & Statistics modules. Handing the Performance Evaluation module to the team that is running the Joint Operating Committee will enable them to manage the property in the best possible fashion. They are going to be able to figure out what it is that makes the most sense in terms of value, and begin to generate more of it. It is as simple as that. Except it is a very complex business. And that’s why you have your best earth science and engineering staff on the job. And the best business / geological / engineering minds running the Research & Capabilities module.

It should be coming clearer that it is no longer the 20th century. That to manage an enterprise requires a different approach, and the first thing that is needed to manage that enterprise is the software to enable that approach. With real shortages in the quality human resources necessary to maintain the markets demand for energy, it will be the producer that is able to maintain a high performing organization based on criteria such as these.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part XXXIII (R&C Part I)

The last thing that we want to do in the Security & Access Control module is to make it difficult for people to collaborate. Innovation is about ideas, and the free flow of ideas is the point of our next two modules review. Making it difficult for people to access the system should not be the result of all of these security requirements. People and Ideas once authorized and authenticated should be able to complete their work, not be involved in mindless security or access control warnings.

We now move on to the Research & Capabilities module of the Preliminary Specification. This is a dual specification module in that it shares strong similarities with the Knowledge & Learning module. The difference is that the Research & Capabilities is a firm, or producer, facing module and the Knowledge & Learning module is a Joint Operating Committee module. The best way to think of these modules is that they are “marketplace” modules. The Research & Capabilities module looks at the producer firm in the context of the greater oil and gas industry from the point of view of a market.

This module is difficult to conceptually understand as it is not in practical use in oil and gas today. If we think that the Joint Operating Committee is the day to day operation of the oil and gas producer. The Knowledge & Learning module will provide a means in which the producers will be able to optimize the earnings of the JOC. The Research & Capabilities should therefore be seen as the means in which a producer can exercise long term value accretion from the firm. The firm of course being a holding of many JOC’s.

The Research & Capabilities module provides a window on the producer firm that is above the noise of the day to day. One that provides the user with the ability to see where the value may be added to the firm. This module moves the work that people are doing away from recording transactions. The management science falls into the category of "interactions" which includes transactional, tacit knowledge, and transformational activities of the producer, its partners and the vendors or marketplace. The Preliminary Specification deals with the automation of transactions to free up the resources of the firm and market. The generation and application of ideas is the area that the innovative energy producer needs to have their resources spending most of their time. The producers will use the Research & Capabilities and Knowledge & Learning modules to obtain windows on these activities.

In the future we need to concern ourselves with the kind of work that computers can’t do. These modules are involved in these new "types" of jobs that humans can do far better then computers. Making judgments, based on good data and information, and deciding on the best course of action. The scope of the application module is unlimited. The proprietary data and information that is accessible by the users of these modules would limit their use to a handful of senior individuals within the firm. However, that does not preclude them from receiving the full scope of engineering resources in terms of software developments. I could see substantial value being developed through the intuitions being confirmed in these applications modules.

What the People, Ideas & Objects application does for the producer firm is align the Joint Operating Committee’s legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks with the hierarchies compliance and governance frameworks. This alignment provides new synergies in terms of operational performance in both the Joint Operating Committee and the producer firm. It also provides increases in the speed, innovativeness and accountability of both the firm and JOC. The Research & Capabilities module will be able to monitor and control these frameworks to see where the value can be gained and is maybe being lost. As we move away from the hierarchy this will be the tool that provides the window on “what” and “how” the transition will best be done. This is what I think will be one of the first uses of the tool.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification Part XXXII (S&AC Part V)

People, Ideas & Objects development of the Military Command & Control Metaphor (MCCM) of the Security & Access Control module is not without some historical context. Before the hierarchy, which I perceive as somewhat of a commercial development of the 20th century, there was only the military structure in terms of large organizations. The main difference between the two is rather subtle but significant. The military structure is much broader and flatter then the hierarchy. That is one of the ideals that we are seeking, but the more important feature is the ability for the chain of command to span multiple internal and external organizational structures.

If we analyze the U.S. Military we find a number of interesting attributes of using the military chain of command that will provide value in the use of People, Ideas & Objects software applications. First is the title and assignment of an individual in the military.  For example, “Sgt. Richard Knuth, Company A, Brigade Special Troops Battalion, 3rd Heavy Brigade Combat Team, 3rd Infantry Division”. A similar title and assignment for the people within a Joint Operating Committee would help to clarify the role and responsibilities, authority and capabilities the individual would have within the JOC. For example this individual might have the following “Richard Knuth, Chief Engineer, Field Straddle, Elmworth. Irrespective of which firm this individual is from each of the participants would recognize that the authority of a Chief Engineer was the same throughout the industry and that the designation of Chief Engineer entitled the individual to authorize the appropriate actions.

Now this is not fundamentally different from how the industry operates today. What is different is the ability to operate in a fashion where the interactions between the producers in the JOC are done as if they were all employed by the JOC. Where multiple producer firms are contributing many full time staff to the JOC. This interaction between producers through the JOC can only be replicated if there is a recognizable chain of command between the firms that make up the JOC. In addition to the recognizable chain of command each organization must have additional governance concerns handled, and compliance plays a big part in this as well. (We will talk more about these in the future in the Compliance & Governance module.) That although it would be an easy thing to implement from a people point of view, the actual implementation of pooling the staff from multiple organizations becomes complex when we consider all of the implications. However, with the Information Technologies that exist today, and the issues of the shortages of earth science and engineering talent we have few choices but to pursue this pooling concept.

The nature of the people that will be working through the chain of command that is layered over the Joint Operating Committee will include all of the disciplines that are involved in the oil and gas industry. The contributions of staff, financial and technical resources will include everyone that is employed by the industry today. I can foresee many of the office buildings being refurbished to accommodate the staff of a single JOC. There the staff from the different producers would be seconded to work for the JOC, working at a single JOC not at any particular producer firm.

In previous blog posts discussing the Military Command & Control Metaphor (MCCM). I noted this inter and intra organizational use of the MCCM was similar to that used by NATO. That armies of the various countries could work together and recognize personnel from each others armies and immediately recognize and use the same chain of command. Unfortunately then came Libya and the failure of NATO may be well at hand. And the unfortunate parallel may be seen as a striking example as why the MCCM might not work in People, Ideas & Objects. I think otherwise as the Joint Operating Committee is the financial framework of the industry. This means that all of the members of a JOC are equally driven by their financial interests. And that financial interest drives consensus. Therefore, the analogy to Libya would be inappropriate as their objective is not financially driven and the NATO members can not form a consensus on what the objective is. The point in using the NATO example was to show the ability to recognize the chain of command spanning multiple organizations. Not to submit that countries driven by politically different philosophies could agree militarily.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification Part XXXI (S&AC Part IV)

Looking at the security aspects of the Security & Access Control module we find that today’s technologies provide levels of security that are substantially higher then just a few years ago. With the security needs of the industry being so high, I believe the following security policies would be more then satisfactory to those needs. And it is suggested that these are the base case, as time passes we will be able to build on these specifications.

For people to be available online anytime and anywhere presents problems from the point of view of authentication. What we can do is ensure that only registered devices have access to the applications, information and data. These devices would include desktop computers, notebooks, phones and iPads etc. Where only certain registered devices on certain IP addresses are available to access the People, Ideas & Objects applications. In addition user name and password protection for access would be required. But in addition, we would require two step authentication where we text a code to their registered company phone, which would then have to be keyed into the device they were trying to log into. These three steps ensure that only authorized users were gaining access to the system.

Next we would ensure that all network traffic was encrypted. It has not been determined as of yet how the application will be presented to the users (browser or otherwise). However, once logged out of the system all data and information will be cleared from the cache and the device will have no information or data stored of the session. It should be noted that one of the advantages of the tools that we are using is that we should be able to present to the user the same desktop environment that they had left when they last logged out.

In our Hardware Policies and Procedures we have discussed how the People, Ideas & Objects application is hosted. This separate company is proposed to be jointly owned by industry, People, Ideas & Objects and Oracle. It is also proposed to be operated by the oil and gas industry primarily to meet their needs of maintaining the control they need for SEC regulatory compliance of their ERP systems. With industry having de-facto control of the “Cloud” infrastructure. This provides them with the means to maintain the physical control necessary to maintain their SEC needs. People, Ideas & Objects will be able to deliver a runnable binary of the application for them to operate without the need to be physically on-site.

And as I mentioned the other day it was an oversight that the Draft Specification initially indicated that the data storage and data base systems were not encrypted. Oracle provides high levels of encryption of both the storage medium and the database, at the data level itself. This will in turn provide no one at the industry operated cloud infrastructure with the ability to read any of the producers confidential data or information.

Implementing the technologies in this fashion will provide the industry with the security that they need to ensure that their data and information remains secure. These technologies are only the beginning of what will be implemented in the People, Ideas & Objects Security & Access Control module as they are all standard fare for the base level technologies used in Oracle. It is a simple manner of selecting them for use.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

The Preliminary Specification Part XXX (S&AC Part III)

When we talk about the various people within the producer firms affiliated with a Joint Operating Committee. And the number of Joint Operating Committees that a firm may have an interest in. And the number of people a firm may have employed. Access control becomes a big issue. It becomes a big issue when you consider that your people certainly should have the access that you require, but the level of trust that you may have with respect to the other partner organizations is probably not as strong. This is the point of this blog post and how People, Ideas & Objects deal with the access and trust issue in the Security & Access Control module.

When we concern ourselves with the data and information of the firm, and the information that is cleared from the various Joint Operating Committees that the oil and gas producer has an interest in. We can all agree that this information is proprietary and is subject to the internal policies of the producer firm. (Information such as reserves data, accounting information, internal reports and correspondence, strategy documents.) What we are also concerned about is the information and data that is held in the Accounting Voucher and the associated data that is common to the joint account. (well licenses, agreements, production data.) Recall also, in our last post, that relational theory deals with predicate calculus and set theory.

Closer analysis of these two types of data and information that are held within the firm and the Joint Operating Committee fall within the proprietary and public domains. In Canada at least, most of the data and information in a Joint Operating Committee can be freely obtained through various regulatory agencies. Nonetheless, the majority of the data is shared through the partnership, vendors, contract purchasers and a variety of other groups who have an interest in the data and information. Not so for the producer firms data. Most of the information is kept close at hand and is only reported through filtered reserve report summaries and annual reports. Therefore keeping a handle on proprietary data, while operating the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer, as proposed in People, Ideas & Objects, does not therefore present any immediate proprietary data leakage.

Access control can be limited by precluding any company personnel from viewing any other companies files. While in People, Ideas & Objects access control is limited to the Joint Operating Committees of the firm and the firms files only. (Set theory.) To extend this further we would have access control limited to the appropriate roles within the firm, then it is a matter for the user community to define a standard set of generic roles in which access is required to certain data types. This would also apply to the types of operations that can be handled by that role, for example, read, insert, update, delete. These generic roles could then be assigned to each individual within the organization based on their needs. Assigning multiple roles for more complex access.

The assignment of roles for access control can then be looked at from the producer point of view. What areas are deficient in terms of access control, are needed to be covered, and are not. An interface could be provided that would show these deficiencies and then additional roles could be assigned to cover off the areas that were previously deficient. A similar interface would be needed for the Joint Operating Committee so that the data and information needs were being met by the people that were assigned to work there.

Lastly these access control roles are assigned to the various positions within the chain of command that is developed through the Military Command & Control Metaphor of the People, Ideas & Objects application. This would be done to ensure that the people assigned were working in a natural way where the data and information they used was available for them to do their jobs.

By using the Joint Operating Committee as the perspective of how we view our systems brings into alignment all of the frameworks of the business. As we focus on the business of the business there will be areas where the producers will want to limit the exposure of certain data and information from some employees and partners. As we can see with this post, albeit with a little effort, it is certainly possible to maintain the acceptable limits to this information that have become the cultural norm in the oil and gas industry.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

The Preliminary Specification Part XXIX (S&AC Part II)

Throughout the Draft and Preliminary Specifications we have discussed one of the premier issues that the oil and gas industry faces. That being the demand for earth science and engineering effort per barrel of oil produced is increasing with each barrel produced. This is best represented in the steep escalation of the costs involved in the exploration and production of oil and gas. At the same time the critical earth science and engineering resources are somewhat fixed and are difficult to expand in the short or medium term. Add to that an anticipated retirement of the brain trust of the industry in the next twenty years and the problem becomes of critical concern.

There are few short term solutions to the short fall in geologist and engineers over the next twenty years. It takes the better part of that time to train them to operate in the industry. What we do know are two things that are being applied in the People, Ideas & Objects software applications modules. Key to these concepts applications are what we call the Military Command & Control Metaphor. The two key concepts are a further specialization and a reduction in the redundant building of capabilities within each oil and gas producer.

The first concept of specialization and division of labor is well known as a principle of economics that brings about greater amount of economic productivity from the same volume of resources. Given that the volume of earth science and engineering resources are known for the foreseeable future, specialization and the division of labor will provide us with a tangible means in which to deal with the productivity of the oil and gas industry. In today’s marketplace to approach a heightened level of specialization and division of labor without the use of software would be down right foolish.

The second concept involves the desire that each producer firm acquires the earth science and engineering capabilities necessary to deal with all the needs of their “operated” properties. This creates unneeded “just-in-case” capabilities for the scarce resources. When each producer within the industry pursues this same strategy substantial redundancies are built in to the industries capabilities. Redundancies that are left unused and unusable. What is proposed through the People, Ideas & Objects software application modules is that the producers operational strategy avoids the “operator” concept and begins pooling the technical resources through the partnership represented in the Joint Operating Committee. That way the redundancies that would have been present in the industry can be made available to the producers and used by the producers through an advanced specialization and division of labor.

What these concepts require therefore is what the Security & Access Control module is designed to provide. As was mentioned in yesterdays post, the system must provide access to the right person at the right time and the right place with the right authority and the right information. With the Military Command & Control Metaphor there will also be a manner in which the technical, and all the resources, that have been pooled from the producers, interact with an appropriate governance and chain of command.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

The Preliminary Specification Part XXVIII (S&AC Part I)

The Security & Access Control module is the place where dreams can be shattered or visions soar to fulfill the possibilities. It was suggested in the Draft Specification that the Security & Access Control module be one of the first modules to be developed. That would still be my recommendation.

What we have with using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer. Is the interactions of many producers and suppliers who are involved in the day to day commercial and strategic concerns of that JOC. What we need to concern ourselves with in the Security & Access Control module is that the right people have the right access to the right information with the right authority at the right time and at the right place. Simple stuff.

What we know is that the basis of relational database systems is relational theory. And that the basis of relational theory is predicate calculus and set theory. And it is here that we can begin to find the answer to the problem defined in the previous paragraph. That is to say that we can define this problem in the context of the Joint Operating Committee being a subset of the producers that comprise it.

There were two glaring errors that have been changed in the Draft Specification. The first one stated that there was no encryption on the hard drives or the database. These points must have been oversights as that should never have been the case and they now read otherwise. And the comment “No development outside of testing this Security & Access Control module will be done with the consent of the users in this development environment.” Leaves me a bit perplexed as to what it means and as a result I have removed it.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

The Preliminary Specification Part XXVII (AV Part V)

As we metaphorically peel this onion we find that this will be the last post on the Accounting Voucher module. We will return to this module as we get down to the deeper layers. However, after this post we will be moving on to the Security & Access Control module to pick up on some of the interactions of the people who are working within the various producer firms and vendors. We have discussed many of these interactions in this the Accounting Voucher, the Petroleum Lease Marketplace, Resource Marketplace and other modules. I will also have one closing comment in this post on the general practicality of the Accounting Voucher outside of its use in the Joint Operating Committee.

In the Draft Specification the Accounting Voucher is described as the crossroads for a variety of other modules in the People, Ideas & Objects applications. And we have described how certain data elements are brought into the Accounting Voucher in order to activate them and make them part of the history of that Accounting Voucher. For example, if a new well is producing it is brought in through interfaces from the Petroleum Lease Marketplace module. Once in the Accounting Voucher it can begin capturing the field data and recording the transactions for that well. What the Accounting Voucher provides is the means in which to take the data elements from the other modules, and conduct the necessary transactions upon them.

The last few posts we have concentrated on in the Accounting Voucher module have focused on the Joint Operating Committee clearing system. And that would be one of the key attributes of this People, Ideas & Objects module. However, there are more attributes to the Accounting Voucher then just the Joint Operating Committee clearing system. As we have noted here before, the Accounting Voucher is able to be used by the producer to capture their 100% charges and that is for all intents and purposes what an accounting voucher would be for in any other system. The use of capturing general and administrative costs, payroll, paying bills and other purposes would be included in the Accounting Voucher module.

Lastly I want to raise the point about the Purchase Order system that we touched on in the Accounting Voucher is something that I think will be a necessity. It should be something that is built in the People, Ideas & Objects applications and be available as an option for producers to use. And as such on the second run through the Preliminary Specification we will spend a little more time on it.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

The Preliminary Specification Part XXVI (AV Part IV)

Today I want to talk about the domain of the Joint Operating Committee. It is clear in the discussion of the Accounting Voucher that we are concerned about capturing and recording the business of the Joint Operating Committee. And clearing the costs and revenues of the property to the producers. What the Draft Specification talks about is Transaction Design which deals with the optimal location for a transaction to occur. The firm or the marketplace.

So much of what the Accounting Voucher aspires to do is to remove the user from the mundane aspects of dealing with transactions. With Information Technologies (IT) that are available today this is not only possible, but a competitive necessity. For instance you can buy an App for a phone that will take a picture of a receipt and code it to an accounting application. This is what I did in 1977 as my first job in oil and gas. The point of the Draft Specification is that users should be designing transactions as the key to building business value. This aspiration is what is so poorly discussed in the Draft Specification, but when your knee deep in papers, that’s the way the world looks.

Designing transactions, more or less from the point of view as to where the transaction will be conducted, in the firm or in the market, is part of the point of the exercise. What and How are two of the traditional questions of how to get things done. Now we need to answer the question, “where” will the transaction occur, and that is answered in the Accounting Voucher. The research and science on TCE that is referenced in the Draft Specification points to a means of determining where the transaction should occur. And that is what are called “thin crossing points”. However the first determination is the assessment of the capabilities of the group that is being assessed for the work that needs to be done. There is of course no sense in trying to determine the thinnest crossing points as the determining factor of who gets the deal.

It may seem intuitive to reduce the point of the transaction between two firms down to the thinnest point being the transfer of the invoice from one firm to the other. And that would score high on an exam but it would fail in terms of implementation of what the possibilities of Transaction Cost Economics could achieve. What if there were a system development, like People, Ideas & Objects Preliminary Specification, that was user community based that included the service industry as part of that user community? Would that provide an opportunity to define some service industry level systems integration that would be complementary to the Accounting Voucher of the People, Ideas & Objects application? Why couldn’t the service industry provider have their people populated into the Work Order system that we discussed earlier? Or, if the user community deemed that a Purchase Order system was worthwhile that this could also be used as means of direct communication between the producers represented in the Joint Operating Committee in the Accounting Voucher and the service industry providers.

There may ultimately be the thinnest of crossing points for the transaction being the invoice that crosses from the vendor to the joint account. Ultimately making the transaction the most efficient from the organizational point of view. However, with the use of IT we can also build on the information that is known and unknown in all of the producers and all the vendors that are party within a “transaction”.

What may not be clear is the need to design the transaction to ensure the business value is realized by the Joint Operating Committee. There is a general rule that whatever operation your conducting in the field, it is generally going to be conducted based on the understanding of the least experienced individual that is present in the field. It just seems to happen that way. Designing the transaction with these constraints in mind can help to mitigate the unknown factors from causing problems down the road. Also, because most of the “transactions” that occur in the marketplace are of such a large size, building of a compressor, building of a gathering system, drilling a well. The ability to apply further scientific strategic “game theory” type attributes in to the People, Ideas & Objects software is possible.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

The Preliminary Specification Part XXV (AV Part III)

Of particular interest to me is this is People, Ideas & Objects 1,000 blog post. Who would have thought that a simple idea of using the Joint Operating Committee could create so much discussion. We are well over 850,000 words and it feels like we are just beginning.

One of the implications of using the People, Ideas & Objects system is that each partner will have access to the Accounting Voucher during the time that the Voucher is either open or closed. Each of the producers involved in the JOC are therefore able to access the Accounting Voucher and have costs / revenues distributed to the other partners involved in the Joint Operating Committee. This is one of the key differences that we had discussed in the Petroleum Lease, and Resource Marketplace modules. Partners are all contributing to the joint account as equal participants with the role of “operator” being relegated to a thing of the past. (Note too of course, that each participant is able to charge their own account with their own 100% charges as well. These charges are to their private accounts and therefore not seen by any of the other participants.)

Cost control becomes an issue when everyone is able to charge freely to the joint account. A careful reading of the previous paragraph reflects that I didn’t state “charge freely”. Cost control comes about as a result of the traditional budgetary control of AFE and the Work Order system that we discussed earlier. Without pre-approval by the partnership nothing is able to be processed by the People, Ideas & Objects software applications. And as we will see in the upcoming discussion of the Security & Access Control module, few will have the authorization to “charge freely” to the joint account in any form or fashion.

With the traditional ability to charge to an AFE or Cost Center, and possibly during the development of the People, Ideas & Objects Preliminary Specification, the user community determines the need to have a purchase order system, ensuring that an appropriate bidding and contracting process is in place, no unauthorized amount will be accepted in the system. There is also the fact that each voucher needs to be approved for payment before any money is expended and that approval would need to consider the authority of the joint account.

As one can envision these Joint Operating Committee - Accounting Vouchers can become large as they include all of the business of the property. Accountants would be pulling their hair out at month-end trying to get these Vouchers closed if they had to seek approvals and close each of the transactions within the appropriate small window of time of their month end. Needless to say that each transaction within the Accounting Voucher is a small subset of the larger Accounting Voucher and can be dealt with as a stand alone individual item. Seeking it’s own approvals and authorizations that deal with just the domain of the specific transaction.

What is different in People, Ideas & Objects Accounting Voucher system vs what exist today is the elimination of the designation of operator. The capabilities to house the state of the art necessary to run the property within one oil and gas firm is believed to be beyond what is possible in the very near future. This is primarily as a result of the further specialization of earth science and engineering skills needed to be attained by each individual within the industry. If each firm were to attain the full scope of these capabilities then they would not be a viable business due to the extreme overhead burden. And specialization is the only solution to deal with the limited resources. Therefore it is necessary for each producer in the Joint Operating Committee to contribute their unique capabilities. The objective is to enable the Joint Operating Committee to draw from the much larger pool of producers engineers and earth scientists in order to obtain the global capabilities necessary for the property to operate.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

The Preliminary Specification Part XXIV (AV Part II)

Reading the Draft Specification for the Accounting Voucher is a tortuous read. What I can glean from the material is what I recall from the research, however, I’m sure no one else has read the research. Making the reading particularly difficult for everyone else. I will, hopefully, make some sense, in the next week or so, of the material through this discussion. I certainly promise to do my best. Another assumption that I am operating from is that everyone has a high level of understanding of how the oil and gas industry operates, making this content difficult to read.

Yesterday we discussed the manner in which the Accounting Voucher was able to handle the material balance report. How it handles the balancing of the volumes, debits and credits, and cleared these amounts to the partnership represented in the Joint Operating Committee. Today we want to talk about the contracts that the products produced may have associated with that JOC. Contracts that would include marketing for gas, oil, natural gas liquids, or contracts for charges for gathering, processing etc.

I don’t know what the correct term that should be used, but stream seems to me to be the most intuitive. If a stream of product was flowing through a facility, then a contract for processing or sale could be attached to it. The ability to attach a contract to a stream would enable the Accounting Voucher to establish the billing of gathering or processing charges / sale for that stream. These charges (invoices) or sales (receipts) being generated in an automated fashion by the People, Ideas & Objects software. This point now brings up a point that is obtusely discussed in the Draft Specification.

The Accounting Voucher is a for lack of a better term a template that is built upon as time passes. Each month as the property changes, these changes are captured within each Accounting Voucher and the template is renewed each month with the new information. If a new contract was added for the production from a new well, then that contract stream and the new well would be represented in next months Accounting Vouchers. The Accounting Voucher documents the changes in the property over time.

So it is with my sincere apologies to any readers that may have tried to make sense of the Draft Specifications Accounting Voucher. One can clearly see the value in a six month sabbatical. I’m sure we’ll run into more bumps along the way and will have to share a laugh at those.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

The Preliminary Specification Part XXIII (AV Part I)

We now shift our attention to the Accounting Voucher module. This module introduces many new concepts that may appear to add a level of complexity to the oil and gas business. However, in reality these ideas help to alleviate the difficulties that are systemic in the industry today. For the purposes of clarity lets jump straight into the point that we have been deferring for a number of posts.

The point was raised initially during the discussion of the material balance report and then discussed further in the reporting of volumes to the many number of users of that information. Those posts deferred the discussion of a final solution of how People, Ideas & Objects resolves the volumetric reporting problems to the Accounting Voucher module itself. Now that we are reviewing the Accounting Voucher lets talk about this solution.

The concluding paragraph in the Draft Specification of the Accounting Voucher states:

The People, Ideas & Objects Accounting Voucher Module will provide the means for the application to manage the disparate inter-dependencies of modularity theory and Transaction Cost Economics. That is a summary application of Professor Baldwins comments. And therefore this Accounting Voucher is one of the key cross roads to all other modules in the application. What is necessary is for people to cease in processing transactions, by way of automation, and move toward the definition and design of transactions to optimize the business performance. The Accounting Voucher is also the most critical to the success of the application and hence the producers that use it. I am certain that in the hands of the user community it will achieve all that is possible.

Simple stuff. Critical to the “definition and design” of transactions is the fact that transactions are balancing themselves out. If the debits and credits were not in balance at the end of the day, then the automation of the systems and the accountants would not be doing their jobs. The same could be said for the volumetric reporting. If the material balance reports were out of balance (call this material balance), or were not balancing the inputs and outputs to other reports (call this system balance), or the internal accounting of those volumes to the partners, royalty holders and others were out of balance (call this partnership balance) the accountants and systems would not be doing their jobs.

What is proposed in People, Ideas & Objects is that for an Accounting Voucher to close it must balance the financial debits and credits, but must also from a volumetric perspective material balance, system balance and partnership balance. Each of these volumetric perspectives being accessed through a different “mode” within the voucher to make the necessary changes to correct any imbalances or errors.

The Joint Operating Committee is not a legal entity. It is a thing that exists in the minds of oil men and women. It therefore doesn’t own anything or incur any costs. All of the charges to the joint account must clear in the month they are incurred. Same for the volumetric information. The Joint Operating Committee "Accounting Voucher" balances to zero in terms of costs and volumes each month by clearing its charges to the ownership and royalty owners of the property.

Note that the clearing is done after the balance. That does not guarantee that the facility will remain in balance. Adjustments and amendments to the Accounting Voucher may occur. These may happen and they can be subsequently cleared to the partnership accounts.

The point of the exercise is that you have the business of the Joint Operating Committee being captured in the material balance report which is an integral part of the Accounting Voucher. Essentially all three are the same thing. (JOC, Accounting Voucher, material balance report.) An integrity of reporting that is embedded within the accounting systems that is as rigid as debits must equal credits.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

The Preliminary Specification Part XXII (PA Part VIII)

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

In addition, since each JOC is autonomous to each other, a producer is able to choose unique strategies for each JOC they have an interest in. That is not to suggest that each JOC within a facility would have their own strategy. They could, however that would be unproductive. What is suggested is that a producer could have each of their major properties operated under their own unique strategies that are developed to optimize the assets unique character. To reiterate, that's each producer within a major area pursuing their own unique strategy irrespective of each others strategy.

Lastly we most recently noted that the JOC was the strategic framework of the producer and it joined the legal, financial, operational decision making, cultural, communication and innovation frameworks within the JOC. This framework alignment has been unrecognized in the existing ERP systems that operate in the oil and gas industry today. People, Ideas & Objects (PI&O) is the only system to recognize, identify and support the Joint Operating Committee’s frameworks. In addition, PI&O aligns the hierarchies compliance and governance frameworks into alignment with the seven frameworks of the JOC. This alignment provides the innovative oil and gas producer with the speed, innovativeness and accountability necessary to compete in the complex era of oil and gas exploration and production.

Application of global or generic corporate strategies are what companies did in the twentieth century. Today producers need to respond at the asset level in order to ensure the optimal value is realized. These findings are based on the extensive research that has been conducted here at People, Ideas & Objects. That although we have sworn off our focus on research we are still able to refer to it. Those posts that refer to our work in strategy would be best sourced from these labels, Strategy, Langlois, and Dosi.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

McKinsey, Translating Innovation into U.S. Growth

There has been much discussion about the role of the United States in the global economy since S & P downgraded their debt. This McKinsey article is an interesting discussion of where the country stands in terms of their influence on global innovation. Certainly the U.S. has been the global leader in innovation. And there are many issues that can be debated as to what that role will be in the future. This article puts a few of them on the table. And although I don’t necessarily agree with the findings, it may have some value to the community.

The difficulty that I have with the document is its reliance on clean energy and the belief that these investments are what will bring about innovations that will sustain the global economy. These ideas of running your car on electricity and saving the planet are about as good as making $1,000.00 a day from your home in your spare time. Well below the esteem of a McKinsey to be recommending them.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

The Preliminary Specification Part XXI (PA Part VII)

Just a quick note about currencies to finish off our first pass through the Partnership Accounting module. As we peel this onion, the Preliminary Specification, we’ll return to this module and dig a bit deeper into the details of how we account for a Joint Operating Committee’s activities.

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

Another aspect of this problem is the currency conversions have different treatments for asset & liabilities then they do for revenues & costs. Revenues & costs are converted at the time they occur and require no further action. Whereas asset & liability accounts maintain a balance over a longer period of time and may need further specific treatment to ensure they are recognized and recorded correctly. If, for example, a producer has finished inventory in a country with a volatile currency, what subsequent value should be assigned to the inventory? This may possibly be answered by the ability to record the finished inventory in US$. But the operational costs may be valued in the domestic currency. And what about items that are of a capital nature? These currency issues are predominately producer related as they are cleared out of the Joint Operating Committees accounts each month. Therefore the accounting for each producer is unique.

Accounting systems should provide advanced tools to deal with these currency issues. And although we have stated that we are not considering any technology in the Preliminary Specification. Use of Oracle Fusion Applications in the Detailed Specifications should be considered as part of the research in currencies for the Preliminary Specification. To preclude the review of Oracle’s product would be duplicating what has already been built.

I would however caution users in the community that the oil and gas industries use of the Joint Operating Committee is unique, and these currency issues are not something that are realized in other industries. And although I believe it is a fair assumption that the Oracle Fusion Applications management of currencies would be state of the art. That state of the art would be for other industries like retail and other industries that would not have the scenario that is noted in this post. That because of the oil and gas industries use of the Joint Operating Committee, currencies are an area that can be built upon substantially from the point of view of what and how the community could contribute to. In terms of peeling the onion we are only beginning to scratch the surface of the currency issues that are experienced daily in the oil and gas industry. These issues are what this community is after in terms of engineering solutions that identify and support innovative oil and gas producers.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

The Preliminary Specification Part XX (PA Part VI)

In Canada at least, there is the accounting month and production month to deal with the delay in reporting of production volumes. The logistics of reporting volumetric information creates a lag of one month in the data so that July’s production data will be reported in the August accounting month. And I’m sure that everyone is familiar with the much loved amendment process for that volumetric data. The adjustment process never seems to end, I wonder if we’ll ever find a solution to it.

I think we have an interesting solution in People, Ideas & Objects. We talked about the material balance report the other day. While we noted the need to balance each report, and each input and output with the input and output of other material balance reports. And that each material balance report essentially represented a Joint Operating Committee. We also noted that we were deferring some of the discussion of our solution to the Accounting Voucher module, which we are still doing. However, today we should note that there are some problems that need to be addressed in the Partnership Accounting module that are a result of the adjustments to the material balance reports. That is that these material balance reports do shift and amend volumes of products around as time goes by and things are found to be incorrect. When the physical world is found to be inconsistent with the reporting, the reporting must change.

As I said I don’t want to get into into the solution today, other then noting that containing the problem within the domain of a Joint Operating Committee helps significantly. I want to add to the discussion of the material balance report by detailing the scope of the engineering problem that we have to solve. The first area of concern is that there are both daily and monthly volumes defining a period of time. Some of these volumes are “spec” vs. raw, products and by-products. Volumes are processed and gathered based on ownership and non-ownership of the processing facilities. There are in North America two, units of measures vs. metric reporting standards. How gas is nominated (daily) and marketed (annually). Finally the royalty holders and the ownership of the properties expect to earn something for their efforts. And each of these variables could generate their own amendment processes.

The myriad combinations of possibilities that happen within oil and gas have to be captured and handled within the systems that are used in oil and gas. That has not happened as of this date. The first aspect of solving this problem is to engineer the solution. Many have tried and have found their budgets to be to small for the job. Approaching this from the one producer perspective may seem like adequate funding, however, no one today is declaring success. If, as we have proposed in People, Ideas & Objects, aggregate the resources of the industry towards engineering the solution, this scope can be scaled, the costs to each producer will be incidental, and the results that each producer will realize will reflect the full scale of that software development effort.

The second aspect of the solution of this issue is to limit the scope of it. That is what we have done in People, Ideas & Objects. First by using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer. What we are doing is adopting the material balance report as a function of the Joint Operating Committee. Which in reality it is. If however we separate it from other Joint Operating Committee’s from an accounting perspective then we can begin to deal within just that JOC as its own autonomous legal entity, which it is. This discussion may initially not make sense until we get into the Accounting Voucher module, and we get into the final aspect of this solution which is where we encapsulate all of this reporting within the accounting system itself.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

The Preliminary Specification Part XIX (PA Part V)

I can see some of the accountants are starting to glaze over as we haven’t been paying them enough specific attention. So this post is to keep them enthused about the system and in attendance for a while longer. After all it is called the Partnership Accounting module. The topic that this post will cover off is accounting cut-offs, good, I see they’ve perked up all ready!

Producers have used a variety of mechanisms to determine a point in time when the working interest distribution of the Joint Operating Committee would change based on the financial performance or activity level of the property. These triggers have been used extensively in the past and I would suggest with the dependence on using Joint Ventures more in the oil and gas industry, these mechanisms will expand in their use and type. What is therefore needed is a reliable means in order to calculate and invoke the necessary changes to the working distribution at the time of the change. With People, Ideas & Objects we have the user community to define the level of control that producers want to build into the Preliminary Specification for these types of accounting cut-offs.

Whether it be an activity level trigger like a Before or After Casing Point Election where the lease holder has the opportunity to join the other working interest owners. The Partnership Accounting module will not necessarily provide any information to enable the decision makers any better decisions. However, it is still important to ensure that whatever decision is made, that the costs are allocated correctly before and after the decision point in the accounts. This is more of an accounting determination in current systems and if the community wants to automate this level of trigger by including the casing point election from the agreement from the Petroleum Lease Marketplace module. Then that is a possibility that can be easily accommodated in a community or user based systems development such as People, Ideas & Objects.

In some accounting cut off situations the point at which the change in working interest distribution is a result of a payout or penalty situation. These require the calculation and determination of when the property has achieved a prescribed financial performance. And then at that point the distribution would reflect the revised working interest. These calculations, determinations and revised distributions are to be automated in the People, Ideas & Objects application modules.

Since these impute performance based calculations. Expanding the performance reporting of the property is an area where I think the user community may have significant influence in building valuable and innovative reporting. Traditional reporting of Statement of Expenditures and Statement of Operations are standard requirements, and included in this systems development. However I’m sure the community of users that are built around the development of the Preliminary Specification are able to expand on this reporting and provide real value for the innovative producer. Recall that we have the Performance Evaluation and Analytics & Statistics modules to help in these areas.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

The Preliminary Specification Part XVIII (PA Part IV)

In yesterday’s post we discussed how the Joint Operating Committee was able to manage who was available to work for the property. The ability to pool the earth science and engineering resources from the partnership is something that is asserted as being a necessity in the future of the oil and gas industry. It should be stated here as well that the Military Command & Control Metaphor would not be limited to just the earth science and engineering disciplines, but would include everyone that is employed within the producer firms. So yesterday’s post would help us to deal with the who, now we need a mechanism to deal with what it is they will be doing.

The next part of the Partnership Accounting module deals with the operational side of how the field work within the Joint Operating Committee gets completed. Partnerships have always had AFE’s and operations budgets to deal with how much will be spent on an annual basis at a facility etc. And those continue in their traditional ways in the People, Ideas & Objects application. This post deals with how the Military Command Control & Metaphor can deploy the resources and authorize the spending of budgets in a manner that provides for the governance of the Joint Operating Committee. Simply we are talking about the Collaborative Work Order System that is part of the Partnership Accounting and other modules. (Compliance & Governance, Petroleum Lease Marketplace, Resource Marketplace modules).

Deployment of the people within the Joint Operating Committee, with the budgets that are agreed to are not enough to satisfy any interpretation of adequate governance. Proper authorization and responsibility needs to be assigned to ensure that plans and budgets are executed successfully. Without a work order system within the People, Ideas & Objects application the governance of the property would not be possible. The ways and means of successfully controlling costs and deploying the resources in a manner to complete the tasks at hand are what the work order system is designed to complete.

The manner in which the work order system will be deployed will be as follows. If someone asks you to work on a project, your first question should be is “what’s your work order number.” Then you immediately start charging your time to the code. It doesn’t matter if your an employee of the producer where the request came from, a partner in a Joint Operating Committee or a vendor or supplier. If they don’t have a work order number you hang up the phone. If they have a number, you key the work order number into your device or keyboard and continue talking. The work order system will aggregate and bill your time while working on that project. The details, chain of command, tasks and deliverables are all delivered within the work order system that was provided when you keyed the number.

Note that one of the benefits of this system is that no work gets done without a work order. Assigning budgets from either an AFE or from internally sourced overhead accounts will be a matter of selecting from budget accounts or from pre-approved allocations. The ability to approve a work order would therefore be at an appropriate level within the chain of command of the Joint Operating Committee designated through the Military Command & Control Metaphor (involving multiple producers). If a work order were to exceed its budget it is reasonable to assume that it was exceeding its AFE or account budget(s if it involved multiple producers) as well, which could trigger action from the Compliance & Governance module of the People, Ideas & Objects application, if that is what management desired or deemed necessary and established in that module.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

The Preliminary Specification Part XVII (PA Part III)

Picking up from our Friday discussion on the use of the material balance report in the Partnership Accounting module. We discussed the geographical and operational scope of the module and you may recall that it included the entire upstream oil and gas operations infrastructure. I want to highlight the importance of this discussion about the material balance report and note that it is to be continued on in a number of future posts in the Accounting Voucher module. I wanted to introduce the scope of the oil and gas operations that we are dealing with in the Partnership Accounting module, and deal with some of the partner accounting issues first before we get into the Accounting Voucher module which is the next module we will be reviewing.

The first Partnership Accounting issue is related to the fact that the earth science and engineering resources that are of such value in the industry are of a finite number. It is asserted here in People, Ideas & Objects (PI&O) that the “operator” classification may become a thing of the past as firms will find it difficult to staff the engineering and earth science capabilities necessary to meet all of the needs of their firm. PI&O enables producers in a Joint Operating Committee to pool their human resources to ensure they have the required technical needs. The pooling wont be a convenience or nice to have at the Joint Operating Committee level. It will be a necessity for the partners within a property to ensure that adequate staffing of the technical resources are secured. That it will become commonplace that each of the partners are contributing technical resources to the property.

If partners are contributing human resources to the Joint Operating Committee then the systems that the partners use should be able to cost these resources, charge them to the joint account, and have their costs recovered by the firm providing the resource. This also brings up the point that if the operator classification has ceased to be valid, the charges for operator overhead, where the recovery of these costs are realized today, the operator overhead charges should also cease to be valid. If three different producers are providing engineers and geologists to the Joint Operating Committee each should be able to recover the direct or standard costs of these individuals for the time they spent working on the property.

What has been included in the Draft Specification and will be discussed here later in the Preliminary Specification is the Military Command & Control Metaphor (MCCM). The MCCM provides a means in which the resources within the producer companies represented within the Joint Operating Committee, can organize a chain of command through the pooled resources to deal with the governance of the property. This governance along with the ability to cost these resources enables producers to allocate the finite earth science and engineering resources more efficiently. This also assumes that during the building of the Preliminary Specification, that the community is able to determine a somewhat standard chain of command for all members of the industry, standard rates for the people in the industry, and detailed job descriptions for the work that each role within that chain of command are responsible for.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.