The Preliminary Specification Part XLVIII (C&G Part III)
In a capital intensive business such as oil and gas, access to capital is a critical capability the producer needs to develop their operation. In order to have access to the capital you must meet the regulatory requirements and compliance needs of the markets. Therefore the Compliance & Governance module of the Preliminary Specification is a critical capability to all those that are dedicated to building an innovative oil and gas producer. That applies equally to ExxonMobil and the start up oil and gas operation.
And it should be a concern of ExxonMobil that the start up oil and gas operation has its compliance and capital in good shape. Why? What’s that saying you can’t pick your neighbor's and you can’t necessarily pick all of your partners. Sometimes you have to deal with partners that you have no history with. You want to make sure that they are capable of operating in a fashion that is at least consistent with standard industry practices. It is those standard industry practices that include high levels of compliance and governance in today’s oil and gas industry operations.
As we have discussed in the past few days the level of expectation by regulators with respect to the compliance requirements are high. It would appear that there is no sense that any relief will be forth coming, on the contrary, we should expect the level of requirements to grow. This is the only reasonable expectation, however, I would ask, have we implemented these compliance frameworks correctly? Have the regulations which are submitted in technical frameworks, been “integrated” to the ERP system, or just attached?
We can see the answer to that question when we find that no current ERP system calculates the Gas Cost Allowance for royalty calculations. To conduct these types of calculations you would need to integrate the royalty frameworks deeply within the ERP systems, and that clearly has not been done. So when it comes to the automation of the compliance frameworks, which is the objective of the regulators in publishing these technical frameworks, nothing has been done from the industry side.
I have always argued that there is two ways in which to approach the problems that we face in oil and gas. One is to automate the processes to high levels with systems. This requires the high capital costs of software development like what People, Ideas & Objects have proposed. Or, you can employ the human resources to maintain the compliance requirements on a manual basis. This is the method that industry has chosen to pursue up to this point. I would ask in times where;
- The cost of capital is historically low.
- The demand for human resources is somewhat constrained.
- The regulators have published technical frameworks.
Why wouldn’t the oil and gas producers chose to develop the People, Ideas & Objects applications.
Automation of the compliance frameworks within the People, Ideas & Objects applications would provide many benefits to the innovative oil and gas producer. The costs of doing this engineering work is being amortized over the entire industry. Making these highly engineered software products, incidental in terms of actual cost to each producer. Access to these systems would be to the benefit to all of the producers in the industry. Enabling the capability of each individual producer to meet or exceed the minimum standard of industry expectations. In a world of increasing demands your partners capability could become a critical issue to your operation. There is a compelling argument here in the compliance part of the Compliance & Governance module. And I think its time for the industry to act.
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.