OCI Revised Organization Constructs, Part VI

Markets

Three modules of the Preliminary Specification are “market” modules, including the Resource Marketplace, Petroleum Lease Marketplace, and Financial Marketplace modules. Each establishes marketplaces where producers can engage in the markets which they need to function. The marketplace modules mimic the three markets that producers participate in and are designed to deal with the day to day activities of each of the producers, service industry and others. Supporting them with the contractual, transaction processing and other capabilities of Oracle Cloud ERP the Preliminary Specification, our user community and their service providers in our Cloud Administration & Accounting for Oil & Gas. Enabling producers to apply their competitive advantages and strategies in the greater oil & gas economy. 

The economic principles of markets and price discovery are two of the mechanisms by which North America has advanced its overall quality of life. Adoption of these within the oil & gas industry are therefore a necessity and the Preliminary Specification will do so as part of the structures that define and support these industries. Our decentralized production models price maker strategy relies on the principle of oil & gas commodities being priced based on the price maker principle. The need for producers to produce only profitable production, after full consideration of all of their actual costs on a timely and accurate basis, is how they’ll operate with Cloud Administration & Accounting for Oil & Gas. Using all of the information contained within the commodity markets price, (production, inventory, consumption, reserves) to determine profitability and ultimately what will and will not be produced. It is these same mechanisms that are involved in every transaction involved in a free market. 

From the Preliminary Specifications Resource Marketplace module we quote from a paper written by Professors Richard N. Langlois and Nicholas J. Foss entitled “Capabilities and Governance: the Rebirth of Production in the Theory of Economic Organization.” they note.

The organizational question is whether new capabilities are best acquired through the market, through internal learning, or through some hybrid organizational form. And the answer will depend on (A) the already existing structure of capabilities and (B) the nature of the economic change involved. p. 21

And

If by contrast, the old configuration of capabilities lies within large vertically integrated organizations, creative destruction may well take the form of markets superseding firms. History offers many examples of both. p. 21”

And

Either way it boils down to the same common-sense recognition, namely that individuals - and organizations - are necessarily limited in what they know how to do well. Indeed, the main interest of capabilities view is to understand what is distinctive about firms as unitary, historical organizations of cooperating individuals. p. 17

In terms of the Resource Marketplace module we first need to discuss two components of how operations are conducted in oil & gas. The reliance on the field service industry providers to extend the producers capabilities and capacities into their regions of interest. If producers were to own and operate their field infrastructure it would otherwise be an impossible impediment and constraint towards progress. The second component is the history of abuse and disrespect that producers have displayed and presented to the service industry over the past forty years. And particularly since 2015 when producers recognized their financial difficulties were amplifying. The status quo long ago accepted the assumption that oil & gas is a boom / bust industry. All other industries sought to work these issues out of their businesses and industries many years ago. It is this continuing acceptance by producers that has left us with a legacy of maybe six good years out of the past thirty six. Officers and directors don’t understand this argument as they’ve experienced thirty six years of superior executive compensation. Producers assumed the service industry would adjust to the boom / bust trend in lock step with them. There is an implied assumption that the service industry, like the oil & gas industry itself, enjoys revenues as a primary industry and therefore continues business as usual during any of the bust cycles. The diversity of the service industry offerings, and their coverage across the various regions of their operations throughout North America spreads them thin operationally. As secondary industry participants they are not as resilient as the producers believe them to be. Scaling back from 1,900 active drilling rigs to 400 during 2015, forcing 50% price reductions on to the drilling operator or they would use another vendor, the producers induced a collapse of their revenue streams into the low teens in terms of percentages of prior levels, which has been devastating on the financial health and viability of the entire service industry.

Now in 2023 the repercussions of this downturn have decimated much of the service industries capacities and capabilities that were once available to producers. The largest service industry providers have left the continent as a result of the abusive treatment they’ve received. Therefore for producers to be working out the boom / bust cycle through our price maker strategy will go a long way to rectifying this issue in the long run. Profitability everywhere and always will build a stable infrastructure throughout the greater oil & gas economy. Providing a stable environment, or constant level of demand for which the service industry can prosper. 

After this and similar treatment over the past four decades investors in the service industry are unwilling to participate in the rebuilding of their much needed field operations. They invested in good faith and were abused by the producer firms. They’ve witnessed the equipment they invested in being cut up for scrap metal to pay the light bill and taxes on the shop. This was due to the producers determining they could get away with leveraging additional field activity by not paying their bills for 18 months after the jobs were completed. Producers should have enlightened the service industry representatives of these plans beforehand. The dilemma today is who’s going to provide the financial resources for the service industry to recapitalize itself and reestablish the capacities and capabilities that will be necessary for a self-sufficient and profitable oil & gas industry? The service industry feels the producers broke it, they can fix it. Maybe when they have some skin in the game they won't be so abusive.

This is what’s known and understood in the market today, it’s not news. Producers expect the service industry to resume normal operations, yet fail to consider the consequences of their prior actions. A similar example is the history of the ERP providers in oil & gas over the past thirty years. I can report there’s still no consideration whatsoever of a second chance these first tier ERP providers will be riding to the rescue of the producer firms. Why, they feel the industry is too complex, too costly and there are not enough producers to be able to negotiate their sales prices fairly. SAP is a custom implementation for each sale. The last two ERP providers left in 2000 and 2005, as documented on page 17 of our White Paper, due to the inability of producer officers and directors to pay for their software development in advance. The only method that these vendors would approach the industry. Producers have had ten years to invest in the Preliminary Specification to make their organizations profitable and accountable and to avoid this inevitable, predictable and fatal outcome but didn’t do so. Not a penny has been spent on People, Ideas & Objects at any point. The need for skin in the game is the apt approach when so many oil & gas ERP investors and vendors have been betrayed so comprehensively three decades ago and as has now been done to the service industry. People, Ideas & Objects are instilling market principles in the producer firms, that however does not imply that those who support them have the inherent trust in producers as a result of their prior actions to be able to rely on market mechanisms at this time. 

As the producers sit upon the primary industries revenues they so enjoy. They will show a thumbs down to this idea as if People, Ideas & Objects is the only vendor they’ll be faced with who has this ludicrous prepayment idea. Officers and directors actions have consequences which have been wholly detrimental to everyone else in the industry. Officers and directors will no doubt argue, rightly, this does not remind them of what markets and price discovery should look like. Correct, it's what’s necessary after the destruction of the markets they’ve caused. 

These facts on the ground are what the officers and directors refuse to consider or admit. Until they do the industry will be beset with problems. These issues need to be dealt with and I am unaware of any other solution. The need to rebuild these industries brick by brick and stick by stick must be financed by the only means now available. The primary industry revenues of the dynamic, innovative, accountable and profitable oil & gas industry. Facilitated through the Preliminary Specifications Resource Marketplace module and decentralized production models price maker strategy. Granted there will be those within the service industry that will continue to scrounge for the pennies falling from the officers and directors pockets. However, that does not create the dynamic, innovative, accountable, profitable and energy independent oil & gas industry that we need. 

The Financial and Petroleum Lease Marketplace will also implement the market's organizational structures into the Preliminary Specification and provide the organized interface necessary to access and interact within these markets. Modules in which the full transactional power of the Preliminary Specifications ERP system supports the activities within these markets. We’ll also briefly discuss the Marketplace Interface that we’re building as I believe COVID provides the opportunity to adjust one's opinion to the use of this feature. I have suffered the slings and arrows, the ridicule for it in the past and there is not much that can stand in disagreement to what I haven’t already heard. In my opinion it is revolutionary and needs to be seen in the context of the changes that occurred in 2020 - 2022. At a minimum it adds an element of serendipity to working from home. One issue that I may not have been clear about is the Marketplace Interface is a virtual representation. Users will be able to access it through any screen on any of their devices. It does not use a headset for the person.

The Petroleum Lease Marketplace module is as one could imagine. An opportunity to post, bid, purchase, sell mineral rights and producing properties in the marketplace that exists and is replicated virtually within the Petroleum Lease Marketplace module. Everything from the opportunity to participate in a joint venture to establishing the surface rights payments is fully supported by the ERP system of the Preliminary Specification. Our product sits on top of Oracle ERP Cloud which includes their tier 1, Oracle Fusion Applications that Gartner rates as the highest quality offering. These oil & gas markets include the data of the Federal, State, Provincial, Freehold and Offshore leases. An opportunity for industry to consolidate on a dynamic platform which uses proven tier 1 technologies with the constant support of the service providers maintaining transaction administration and accounting in a standard and objective manner. (Note: People, Ideas & Objects have maintained the policy, and it is written into our user community and service provider licenses. That we will maintain arm’s length distance from all royalty administrations. We are operating in the best interests of the oil & gas industry. To ensure that they are provided with the most profitable means of oil & gas operations. There will be no compromise on this anywhere within this community.) This will be enhanced with the constant iterative design and development being undertaken by People, Ideas & Objects user community and developers on a permanent basis. Whereas if a jurisdiction reviewed and changed their royalty rates at some point, in terms of either the rate or method calculated, producers would not need to concern themselves with the administrative or accounting aspects of those changes. Our user community, developers and service providers would have them covered and implement the necessary changes in the software and services in a timely and accurate manner. Producers would only need to deal with any issues regarding the revised costs of the royalty. 

Administration and accounting are not competitive advantages of the producer firms. Thankfully that is one of the statements that we’ve received no pushback on. That doesn’t mean that these areas have to be a hodge podge, slapped together system that only makes do. There’s no reason why the industry shouldn’t have achieved state of the art ERP systems within their firms. That producers haven’t, has led to many questioning not only the integrity of the accounting but also the systems that are being used by industry. This questioning should never have been necessary and implementation of tier 1 ERP systems is now an explicit demand of the investment community. Oracle Cloud ERP is the premier tier 1 ERP system in the market. 

And why is it that the issue of overproduction, or as we define it as unprofitable production, can be documented to have existed in the North American marketplace back as far as July 26, 1986? The solution we propose to the overproduction issue, in addition to aligning all of these organizational constructs which has been available since August 2012. In terms of markets, it is alleged that there is double the amount of oil needed up until 2050. This capacity overhang forces North American high cost producers to assume the swing producer role and produce only profitable production. Saudi Arabia's production costs of $3.00 and probably $0.00 capital costs and could therefore produce profitably at any price during the next 28 years. They could use the money, and markets in 2050 are too far away and unpredictable for them to sit back and wait for. 

The third marketplace module is the Financial Marketplace module. Moving to the Joint Operating Committee as the key Organizational Construct of the dynamic, innovative, accountable and profitable producer is achieved through the Preliminary Specification. In the Joint Operating Committee section we noted that the movement of the knowledge, which includes the detailed actual, factual accounting information for that specific property, to where the decision rights were held, which is the Joint Operating Committee, enhances accountability. It's here that the Financial Marketplace enhances that accountability with the board of directors' interaction with their current and prospective shareholders and bankers. A review of the Financial Marketplace modules specification would be the best source of information to capture an overall understanding of the module. With the standard and objective nature of the accounting that is conducted throughout the Preliminary Specification and the service providers. Would that satisfy some of the issues that investors and bankers have raised regarding their investments and loans in the industry? Where everything being produced is profitable and the producers are seeking to maximize their profits by shutting in unprofitable production. Would People, Ideas & Objects, our user community and service providers be helping producers satisfy their shareholders and bankers to the point where they’d begin investing in the industry again? 

OCI Revised Organizational Constructs, Part V

 Innovation

People, Ideas & Objects et al need to be concerned about the startup to junior sector as much as any other classification within the industry. This is purely for the fact the industry’s rebuilding will be done on an innovative basis. Innovation is the basis of the Preliminary Specification. It enables People, Ideas & Objects, our user community and their service providers to achieve our two opposing objectives of providing oil & gas producers with the most profitable means of oil & gas operations everywhere and always, and providing consumers with the lowest possible cost of an abundant and reliable domestic energy supply. We do this with our decentralized production models price maker strategy that ensures all production is produced profitably. Including Exxon's, Shell’s and that startup oil & gas firm that began this morning. And to do so innovatively to ensure that the ever escalating costs of oil & gas remain affordable to consumers and the commodities production profile and reserves continue to expand. Achieving profitable, North American energy independence.

Enter two variables that were not available in prior decades and centuries. The cloud computing era with the maturation of the overall technological infrastructure that is best represented by the Internet. We are at the infancy of what the Internet can provide. And the second variable being the “service” aspect of our user communities service providers. It was discovered in our research that the level of innovation that is attributable to the small and medium sectors of an industry were as substantial as the larger sectors. Although the larger sectors contributed large amounts in terms of total spend it was no greater than the effect of what the other sectors contributed. People, Ideas & Objects et al provides our solution for all sectors of the North American oil & gas industry and for all producers. Professor Giovanni Dosi was one of the key sources of research that we used to determine the framework necessary for an innovative oil & gas industry. Innovation within a science and engineering based business is therefore an inherent part of both these demands for profitable operations and consumer affordability. Professor Dosi’s paper “Sources, Procedures, and Microeconomic Effects of Innovation” September 1988, discusses and asks what are “the sources of innovations opportunities, what are the roles of markets in allocating resources to the exploration of these opportunities”?

People, Ideas & Objects research in oil & gas focused on these points: 

• The main characteristics of the innovation process. 
• The factors that are conducive to or hinder the development of new processes of production and new products.
• The processes that determine the selection of particular innovations and their effects on industrial structures.  (p. 1121). 

There are two major issues identified by Professor Dosi: 

• The first issue is the characterization in general of the innovative process.
• And second, the interpretation of the factors that account for observed differences in the modes of innovative search and in the rates of innovation between different sectors and firms, and over time. (p. 1121). 

Professor Dosi then makes the statements that, 

The search, development and adoption of new processes and products in market economies are the outcome of the interaction between: 

Capabilities and stimuli generated with each firm and within the industry of which they compete. (p. 1121). 

The purpose of People, Ideas & Objects research in oil & gas was to focus on the organizational capability and capacities of the firm. Specifically in the earth science and engineering disciplines. It was also emphasized that innovations are based on both the firm and the industry. Coordination of the capabilities and stimuli of both the firm and the industry would therefore need to be advanced through changes in the organizational structure of both.

• Broader causes external to the individual industries, such as the state of science in different branches, the facilities for the communication of knowledge, the supply of technical capabilities, skills, engineers, and so on;  (p. 1121). 

Additional issues include 

the conditions controlling occupational and geo - graphical mobility and or consumer promptness / resistance to change, market conditions, financial facilities and capabilities and the criteria used to allocate funds. Microeconomic trends in the effects on changes in relative prices of inputs and outputs, including public policy. (regulations, tax codes, patent and trademark laws and public procurement.) (p. 1121) 

As People, Ideas & Objects would suggest these define an organizational construct that innovation demands in order to either flounder or foster. As both an Organizational Construct in itself, and as we defined in the Joint Operating Committee, a framework of that key construct. What we can impute from this definition of innovation is that it is a defined and replicable process that can be established through organizational design. And this design must be part of the organization's ERP software that identifies and supports that organization and its industry, such as the Preliminary Specification is configured to do. 

Our second source of primary research material regarding innovation came from Professor Richard N. Langlois. Throughout our review of his work we were able to determine the appropriate nature of the organizational design of the producer firm and the oil & gas industry itself. Selecting specific areas of the firm or market as to which the process and its management should fall under. Where the capabilities should reside. By fully implementing the Internet and using Professor Langlois research, which included Professor Carliss Baldwin determination of where exactly that transfer between firm and market should occur. We were able to design the appropriate software tools, such as our task and transfer system that will enable our user community to define which processes to undertake and manage in their service provider operations. Introducing enhanced efficiency in the manner in which the administration and accounting is conducted in oil & gas. 

Building on the other innovations that are rapidly providing value generation such as cloud computing. People, Ideas & Objects, our user community and service provider organizations are able to undertake this through the introduction of our Cloud Administration & Accounting for Oil & Gas. A service that turns the fixed producer overhead into a variable industry based overhead that can be provided to any producer no matter what their size or production profile. Enabling producers to shut-in unprofitable production, and therefore incur a null operation, and only produce profitable properties, maximizing shareholder value. A substantial portion of our published value proposition of $25.7 to $45.7 trillion over the next 25 years is attributable to introducing this production discipline to eliminate the damage and destruction caused by overproduction over these past decades.

The Preliminary Specification has captured this understanding of innovation and incorporated it within the culture of the industry we are rebuilding in these Organizational Constructs, and as part of the innovation framework of the Joint Operating Committee. Each of the fourteen modules of the Preliminary Specification are materially affected when we identify the Joint Operating Committee as the key Organizational Construct. That provided us with an opportunity to incorporate this understanding of innovation in the design and reorganization of the oil & gas producer firm and industry. These can be identified by several major processes of innovation within the Preliminary Specification. One of these ensures that failed innovations and experiments, and their underlying processes are not repeated by separate and distinct areas of the organization, each year. Attempting the same failed “ideas” repeatedly is not innovation. Another major process of innovation is to enhance the scientific basis of the producer firms and industry as a whole. Moving forward on the basis that an idea that would generate a dollar today will only produce ten cents tomorrow. We therefore must increase the volume of ideas generated and incorporated in our work processes to continue increasing our value. Various other processes of innovation have been incorporated throughout the Preliminary Specification based on the primary research conducted by Professors Giovanni Dosi and Richard N. Langlois. Enabling producers to earn the unquantifiable value that needs to occur throughout each of the producer firms and all tiers of the oil & gas industry in the decades to come.

Oracle Cloud Infrastructure (OCI)

Continuing our discussion regarding the recent Oracle CloudWorld 2022 conference. The incremental and continuing value that producers need to generate through enhanced innovation can be facilitated through the development and implementation of the Preliminary Specification. Oracle’s products are the stand alone premier technologies in database, systems development and ERP systems and the base of the Preliminary Specification. Oracle is now partnering with service providers to enhance their products with a variety of service providers in order to bring about the innovation based benefits we have been discussing throughout the Preliminary Specification. Theirs will be in the domain of the generic business processes such as banking etc, or the non oil & gas specific processes that we handle through the 14 modules of the Preliminary Specification. Our proposed combination of Oracle Cloud ERP, People, Ideas & Objects, our user community and their service provider organizations are designed to deliver the foundation in which the producers, the oil & gas industry and all the tertiary industries can succeed in the 21st century. Without these facilities and capabilities the question we would ask is how will industry “muddle through” so many of these issues and opportunities otherwise?

Since Oracle’s beginning they have pioneered the development of their technologies to be the premier tier 1 provider in all categories of their offerings. Oracle has been the critical and essential innovator in each of their products markets. They continue today with products such as Oracle Cloud ERP and Oracle Cloud Infrastructure that continue that heritage. Recently with the Oracle CloudWorld 2022 conference we saw a new direction beginning with their development of service providers to augment their products. These new products and services bring tremendous incremental value to the oil & gas users of these Oracle products. And are consistent with the work that People, Ideas & Objects have undertaken to complete on behalf of the North American producers. 

Innovation throughout the business and industry specific process management, built upon the premier tier 1 Oracle products augments the dynamic, innovative, accountable and profitable nature of what is demanded of the North American oil & gas producers. This is not a static environment. It will be throughout our user community and their service providers that producers will be able to interact with all aspects of the business and industry specific process management. To make changes, to innovate and develop these further which is an inherent part of the People, Ideas & Objects and our user communities permanent software development capability. But there’s more.

With the producers configuration being oriented towards this innovation Organizational Construct. With the Joint Operating Committee Organizational Construct holding innovation as one of its seven frameworks. Not only oil & gas producers, but the entire oil & gas industry and its tertiary industries and supporting institutions will be culturally aligned and oriented through Oracle Cloud ERP and People, Ideas & Objects Preliminary Specification towards innovation in the earth science and engineering disciplines. Providing the means to rebuild the industry in this configuration with the software that defines and supports these objectives. Where the industry's approach towards its next 25 years can be the most dynamic, innovative, accountable and profitable of its history. A future that is unquestionably the most demanding, challenging and exciting in its history. 

OCI Revised Organizational Constructs, Part IV

 Intellectual Property

The Preliminary Specification establishes a solid foundation for which the Intellectual Property of individuals within the industry becomes available to those original authors, innovators and entrepreneurs. This is provided through the Resource Marketplace, Research & Capabilities and Knowledge & Learning modules that were published here in final form by August 2012. From the Resource Marketplace module I summarized the point as.

Another key point is the tearing down of the basis of Intellectual Property (IP). An industry such as oil & gas which is based on its earth science and engineering needs. After all, it is a business based on science. If we are to expand the capabilities in science and innovation in the industry. We are going to need to solve many very difficult problems. And as we progress, the volume of ideas needed will be an order of magnitude of what is required today. These problems cannot be solved in an environment where there is no upside for the individuals to solve them. Addressing the motivation to solve these problems and enabling the people to earn the rights to their Intellectual Property through the People, Ideas & Objects application modules is the first step in making the necessary industry wide changes. This therefore will turn the oil & gas industry into a far more dynamic business.

With the state of the industry as it is, its IP is in disarray, the capabilities and capacities that are derived from it are deteriorating as we speak. Making this somewhat of an IP gold rush in the industry, in order to save it. Producers' difficulty is that none of this is published and the act of publishing is how copyrights are earned. Let me pass on one more important fact that I’ve determined since I’ve been so reliant on copyright. Patents and trademarks are defensive, in nature in that they protect what is known of your IP. Copyright is offensive and allows expansion of one's Intellectual Property. Building on the shoulders of giants. Copyright does not secure for you the rights to an idea. It only provides you with the monopoly rights to the expression of that idea. Implying it must also be pursued and maintained much in the manner that I do here at People, Ideas & Objects. Until the Resource Marketplace and other modules of the Preliminary Specification are built I see this IP of the industries earth science and engineering unclaimed. Therefore the first thing we must do for the dynamic, innovative, accountable and profitable producers in the oil & gas industry is change their competitive advantages. They'll now read: 

Coordination of the markets earth science and engineering capabilities and capacities, their land and asset base. 

One of the most promising forms of IP today is software and algorithms, Artificial Intelligence and Machine Learning. What if these were also the foundation of a producer firm as competitive advantages, generating revenues for these producers and the people who developed them in the form of service revenues, license fees and royalties etc? Helping to establish the new and innovative oil & gas industry.

Business is changing quickly. Intels dominance in the chip market is now a constraint that is causing them to lag that market in consequential ways. As the dominant manufacturer of processors, theirs has been deemed a redundant business model. The business value is no longer in the manufacture of processors, it's in their design. Contract manufacturing is a commodity business where others are finding profits and opportunities in that area where Intel does not compete. In terms of design being the value, that is now the case and you should read the summary of Ampere Computing’s Leadership Team that now has one of the most powerful processors available in commercial volumes. Oracle has declared they’re moving their cloud offering to Ampere processors, which Oracle’s Cloud is offering today, and People, Ideas & Objects will be running the Preliminary Specification exclusively on Ampere which will be far better due to the better cost / performance than the Intel based cloud computing can offer. 

This is the new business world and these are the new business rules. It comes down to one word, the individual. If you don’t see what the rebels at Intel did when they established Ampere your best opportunities may remain with the current bureaucracies. Individuals in technology, oil & gas and everywhere are facilitated by that great innovation known as the door. The Internet demands one thing which is the one thing that’s difficult to achieve. The software to organize. To organize society today, with its global reach, can not be done in a spontaneous manner. There is no serendipity when individual A meets individual B 2,000 miles away on the Internet through software providing them the means to conduct their business. Software defines and supports the organization. Without People, Ideas & Objects none of this oil & gas vision will come about by sitting and waiting for the phone to ring. At least it doesn’t appear to have happened.

The question also needs to be asked: why is it that Apple continues to innovate consistently? Although their products are more costly, they bring incremental value to their customers through the innovativeness they provide. They too rely on Intellectual Property as the basis of their value. They in fact consider themselves a software company that sells hardware in order to bring about that customer value. Again, software defines and supports their organization. What fool would run a company that sources their handful of products from a number of countries that total in excess of 3.5 billion in population? And then have the gall to snap their fingers and say “now innovate.” It doesn’t happen without software.

It’s no longer enough to just own the oil & gas asset, you must also have access to the software that makes the asset profitable. We now believe as a result of the Oracle CloudWorld 2022 conference that all firms in all industries will have distinct competitive advantages by using Oracle Cloud ERP. These should be seen as incremental to the benefits of People, Ideas & Objects et al. The importance of IP in the oil & gas industry is it will organize innovation. The most productive innovation is when it’s organized under a structure that provides for the market to focus on its development. The North American marketplace established IP centuries ago and we have reaped its benefits. The United States included copyright in its Constitution. Copyright has to be published in order to be earned. Exposing it to the market where it can be built upon and enhanced by others. It reduces the “me-too” phenomenon that producers have created in the past to generate price competition in the service industry and elsewhere and ensure everyone was rendered “blind sleepwalking agents of whomever would feed them.” Is this how an innovative industry is going to be built, with producers sitting on top of a primary industry and using its revenues to endow their favors with the rewards of a penny or two here and there? Are the oil & gas issues we’re faced with to be resolved on this basis?

The organizational structure of the new oil & gas industry People, Ideas & Objects et al will be building has innovation structured and based on the laws of the land. It will be these laws that define what innovation is undertaken and what is not. The violation of another's copyright is not allowable under the law so there would be no violators. A self policing mechanism reducing the overall costs of unnecessary, endlessly repeated duplication of innovation in the industry. Providing the incentive for those with a few ideas of their own, and as a result, the inherent motivation to do the subsequent hard work that is necessary. Knowing their work will now be trusted and respected. To do so not just for today, but for always and everywhere. 

These copyrighted publications enable an understanding of how things are done. Building upon that understanding with additional innovations. Intellectual Property therefore provides us with a strong legal structure that promotes innovation, eliminates the costly redundancy of duplication of efforts, educates and provides the motivation to do the difficult and challenging work we can all agree is the foundation of the industry. This applies across the greater oil & gas economic structure and includes the secondary and tertiary industries. The 21st century will be known for the leverage of Intellectual Property, or intelligence. Much as the last century has been about the leverage of mechanical work. Avoiding this new reality or attempting to opt out would be foolhardy in the extreme.

What is the motivation for people to develop these “ideas” of theirs? Are they not in it for themselves and looking to siphon off what they can from the industry? Self interest is a part of every human endeavor. It comes down to whether or not it builds value. Officers and directors have been well compensated and the industry has been destroyed. A further contrast is the fact they’ve not been motivated by the discovery of ways in which they can build value. Intellectual Property is therefore not only a structural Organizational Construct that can enable the means to control the innovation process throughout the industry. The motivation behind the participants is purely from the point of view of building value through the establishment of incremental profitability, reduction of cost, improved production deliverability or the expansion of reserves. It is the law, and most importantly of all, proven. The reason the United States dominates the global economy in terms of performance is due to the fact their Intellectual Property laws provide the motivational and organizational principles of how their economy and society operate. It assumes people are Intelligent beings, not serfs like the officers and directors assume. It is productive, constructive, focused on generating value and is an overall benefit to society. As a science and technology business, that is reputed to be second only to the space industry in terms of complexity. What has and what have these officers and directors been doing under their business model?

The business model of the producer firms, I believe, was and is to have a pool of knowledge freely available to them when and where they want it and need it at its lowest possible costs of nothing. Therefore they couldn’t have anything published in this environment as it would be counter to their best interests in terms of any of their availability and access to this pool of Intellectual Property. And therefore nothing has been documented in the industry from the point of view of the science and technology of earth science and engineering. Leaving themselves fully exposed at this time through the publication of this IP by any author.

Two other aspects of Intellectual Property are first, what’s known as the safe harbor provisions. Why don’t producers just turn around and launch a lawsuit against the copyright holders? This would be an unfortunate world where “big” ruled the earth and we serfs would be the drones who were forced to cooperate with their every command. The safe harbor provision states that you can not launch a lawsuit against the copyright holder. Secondly, the division of tacit and explicit knowledge. Tacit knowledge can not possibly be captured or written down. Only explicit knowledge can. Therefore it is up to people to take the explicit knowledge they have, earn the copyright, and apply their tacit knowledge to generate their value as a service. The services associated with Intellectual Property are as important as the IP itself. Just as People, Ideas & Objects have our user community heading up the service providers that are delivering our software and their tacit knowledge providing services to the producer firms. Therefore fulfilling our need to have the effective and efficient delivery of the tacit and explicit knowledge underlying the Preliminary Specification. The ability to manage and implement the producers' second revenue stream is through the Work Order we identified earlier. 

These efforts of ours to use the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil & gas producer began in August of 2003 with a research proposal to industry. People, Ideas & Objects subsequently conducted that research ourselves which was completed with the publication of the Preliminary Specification. A full decade of rigorous research that is reflected and absorbed throughout this blog and elsewhere. And now that the obvious need in the market for this ERP system has come about, Boards should be aware that the time taken by People, Ideas & Objects to conduct this research, to effectively deal with these issues and resolve them has offset what would be industries largest cost of all. The time needed to generate a sustainable, viable, workable business model. We enable them to yield untold value creation in the short term and not have to undertake that ten years of research themselves. In addition our three strategic competitive advantages are our user community, research and Intellectual Property. Anyone offering similar aspects to the Preliminary Specification in their ERP software would be violating our Intellectual Property and we would expect, as law abiding citizens, the oil & gas producers and its employees would adhere to these principles of law, recognize that and refuse to use any software that violates that. 

It is People, Ideas & Objects, our user community and their service providers that are channeling these Organizational Constructs towards innovation, productivity and profitability through software. It is software that defines and supports the organization. The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that are and have been proven to be disastrous. 

OCI Revised Organizational Constructs, Part III

 Specialization and The Division of Labor

Without ERP software focused on delivering profitability everywhere and always there is no way in which to organize today’s society in a profitable direction. This is proven through the quality of the ERP systems used in oil & gas today and the systemic lack of profitability throughout the industry in what we refer to as the “modern day software bug.” We should note here that People, Ideas & Objects, our user community and their service provider organizations target market for the Preliminary Specification is the North American based production profile. We are focused on providing an industry wide solution, that upon reading the Preliminary Specification in full, you may agree it demands participation from all producer firms. In the categories of the junior and startup oil & gas producers, the advantages we provide their organizations ensures they’ll prosper and grow. They’ll have distinct competitive advantages over the methods of organization provided under today’s business model. We also know that consolidated producers are not how the industry will survive. It will be the small and startup sectors of the industry that will rejuvenate the industry. It was discovered in our research that the level of innovation attributable to the small and medium sectors of an industry were as substantial as what the larger sectors contributed. Although the larger sectors contributed larger amounts in total spend it was no greater than the effect of what these other sectors contributed. 

The producer organization that we define and support in the Preliminary Specification sets out to employ and deploy much higher levels of specialization and division of labor. We believe the overhead costs of the producers demand these be dealt with by making producer organizations more efficient through the application of an advanced, and continually advancing, specialization and division of labor. We also turn producers' overhead costs from a fixed, producer based, capacity and capability, into a variable, industry based, capacity and capability. The overheads variable behavior being based on a Joint Operating Committees ability to produce profitable production. 

What the Preliminary Specification defines and supports is a reallocation of the producers administrative and accounting resources into the service providers who are headed by one of the People, Ideas & Objects user community members. Our user community and their service providers are independent businesses that are specialized on one administrative or accounting process and conduct that process on behalf of the entire North American oil & gas industry as their client base. Whereas if that Joint Operating Committee was producing for that month, under our decentralized production models price maker strategy, we can reasonably assume it’s profitable. Then the processes that are specifically administered by each of the service providers will be invoked and their associated billings for each process will be charged directly to the individual Joint Operating Committees. If the property is not profitable then the producer will shut-in the production and none of the service providers will receive any data from our task and transfer network and therefore no accounting or administrative processes will be conducted and subsequently no service provider billings will be rendered. The shut-in property therefore does not incur a profit or a loss, but a null operation. In either scenario overhead costs are covered in the current period through either profitable operations or the fact the cost behavior is variable under the Preliminary Specification, and as a result not incurred. 

Producers today defer the recognition of overhead costs by capitalizing on average 85% of their overhead to property, plant and equipment and recognize them through depletion over the course of the subsequent decades. Leaving them looking for the cash necessary to pay next month's overhead costs as the current month's overhead costs are never included in the costs passed to the consumers. And hence the producers' past excessive demand for annual investor injections of financial resources. This error in basic cash management continues unaddressed today as overhead is where their executive compensation skeletons are hidden. The lack of transparency on these costs is due to the remaining uncapitalized overhead costs realized in the financial statements do not rise above the point of materiality.

There are many benefits for producers to begin operating in this manner. First they will reach their optimum profitability when losses are no longer diluting profitable properties. When all costs are variable, production will be profitable at 25%, 100% or at any level of their production profile. This also preserves their oil & gas reserves for a time when they can be produced profitably. Those reserves no longer have to carry the incremental costs of the losses that would otherwise have been incurred if they continued to produce unprofitably. The commodity markets will find the marginal price when the unprofitable production is removed from the marketplace. Increasing the value of all the producers' production. Keeping the commodity as reserves can be seen as an affordable means of storage as opposed to incurring the costs of production and storage or what may be sold unprofitably. 

Producer officers and directors assert the Preliminary Specifications price maker strategy is collusion. If making independent business decisions at the property level, based on detailed, actual, factual, standard and objective accounting information that is determining profitability is collusion, then? Once they realized their collusion claims were moot they stated unequivocally that they could never shut-in any production, it would cause the formation to “fold over on itself” or other such excuses. That is until they ran the oil price down to negative $40 in April 2020. Refineries had to tell them they wouldn’t take anymore, forcing production to be shut-in. Upon resumption of the covid induced shut-in level of 25% of the global production profile, producers reported there was no reserve damage whatsoever. There stands today no justifiable reason not to implement the Preliminary Specification. Oil & gas commodities are price makers, not the price takers the producers assumed they were for all these decades. The one critical aspect of a price maker is that they will only bring on new production when it’s profitable. This method we’ve developed is detailed further in the Preliminary Specifications Preamble. It is a direct result of the reorganization through a hyperspecialization of these resources in the service providers noted above.

The question is asked regarding heavy oil production. These operations are not able to be shut-in as the process dictates constant production. Shut down and start up costs would be somewhat terminal to the operation. There is also the argument that they’re not operated in the same manner as a conventional or shale Joint Operating Committee. Including their ERP systems which are quite different from the oil & gas producers. The question therefore is why wouldn’t this preclude them from participating in the costs of the development of the Preliminary Specification? Their production profile is in excess of 4 mm boe / day and are therefore significant benefactors of the industry activities in ensuring that all production is produced profitably. People, Ideas & Objects' alternative question is why would the heavy oil producers be allowed to benefit in such a material way on a free ride basis. 

Overall our decentralized production models price maker strategy invokes a high level of production discipline within the North American oil & gas industry. Achieving maximum profitability can only be gained through the fact that unprofitable properties dilute corporate earnings. Therefore the need to ensure they are fulfilling their primary task of maximizing profitability becomes the predominant method of production discipline. In order to compete in the capital markets of the 21st century will be much different than what it was in prior years. With technology and other industries providing growth opportunities, for oil & gas companies to argue they are in a growth mode precludes them from that competition. They are a primary industry with commodities that are subject to the price maker principles of economics. This will also affect producer's capital allocation and capital discipline. Capital investments will only be made with the assumption or demand that they be immediately profitable, and why would they invest in them if they can’t achieve that criteria. This invokes a far different criteria as to what is done in the industry and we can cast the foolishness of “building balance sheets,” “putting cash in the ground” and the like to the scrap heap of history. 

The producer's 2020 / 2021 consolidation route is contrary to every possible reality on the ground in the business world today. Concentration of the bureaucracy is not going to resolve what has afflicted the industry for the past four decades. Rebuilding as People, Ideas & Objects propose will involve a dynamic industry based on a decentralized, connected environment such as the Internet provides. Hierarchical strata of advanced paper shufflers is a future failure, best defined. To bring about an ERP system for the industry such as the Preliminary Specification provides; must consider the opportunity of what is commonly referred to as disintermediation and the tried and true specialization and division of labor principles. 

However, bringing one of the most complex systems into one of the most complex industries into the environment of the small and startup producer is foolhardy to consider. How could that ever be a commercial software product? Or be provided to a commercially viable small, junior, intermediate and integrated oil & gas producer? And that is the fact of the issue. We need to ensure the future of the industry is in the hands of the oil & gas men and women who will knock down the barriers that stand in their way, just as so many have done before. The constraints and reality of just the regulatory, compliance and investment demands are real and an impediment to these needs. That is, if small and junior producers could not access the kind of systems necessary to operate in that capital environment, no matter their size, the capital markets will remain forever closed to them. An untenable barrier today that will be even greater in the near future. Effectively shutting the door on a large portion of the innovative nature of the industry.

Under the Preliminary Specification a startup or junior producer would no longer need to establish the point where they’ll have to generate the excess of $3 to $5 million of free cash flow necessary to offset the annual base overhead of the firm. For the administrative and accounting they’ll only be incurring the variable overhead costs of the service providers fees when and if used. The service providers are there to enhance the explicit knowledge contained in our software with their tacit knowledge they provide as their services. It is a variable cost, industry based capacity and capability available to the industry in the form of Cloud Administration & Accounting for Oil & Gas. Not only are these overhead costs variable, but if they’re incurred that denotes profitable production, indicating these costs are covered, or the property is not producing and as a result not incurring any of these overhead costs. At the same time, due to specialization and the division of labor, all firms in the North American industry will be fully capable and have the administrative capacities available to deal with all of their needs through these service providers. And there are more attributes of our system that provide benefits for the new oil & gas industry People, Ideas & Objects, our user community and their service provider organizations are building. 

People, Ideas & Objects have identified new cost structures that will diminish the performance of the producers. These include the costs of:

• Recovering the past property, plant and equipment account balances, or as we describe them, the unrecognized capital cost of prior production. Whereas if recognized today and passed to the consumer it would provide incremental cash flow via our decentralized production models price maker strategy to provide dividends in compensation for the past excessive reliance on investors. And reduction of bank debt that predominantly supports the property, plant & equipment account.
• The refurbishment of the infrastructure as it stands today. 
• The rebuilding and expansion of the infrastructure. 
• And finally the looming and escalating reclamation costs of the industries past. 

The producers have incurred each of these costs as a result of providing for the consumers energy needs. Without a means of passing these capital costs incurred in a capital intensive industry on to the consumers, such as the Preliminary Specification does, they will bankrupt the industry, or their investors under the officers and directors current and consolidated business model. These form the legacy of the producers in terms of the property, plant and equipment balances which we’ve determined are not transferable out of the corporation. Taking on the expansion of the infrastructure may be the largest of these costs, and I would suggest the greatest opportunity for all concerned in a dynamic, innovative, accountable and profitable primary oil & gas industry, and most specifically the secondary and tertiary industries. 

The Preliminary Specification implements specialization and the division of labor across the producer firm and most particularly in the earth science and engineering capabilities and capacities of the producer firms and industry overall. We list this as the first step in our solution for the startup and junior producers. These capacities and capabilities are becoming increasingly burdensome to each of the producer firms due to their unshared and unshareable nature, but for different reasons from the administrative and accounting difficulties mentioned. The costs incurred to maintain these capabilities are growing as a result of the advancement of their science and technological development which demands further specializations be undertaken within each of the producer's capabilities, and critical competitive advantages. We believe that all producers have reached the point where the demands to maintain these capacities and capabilities have expanded beyond the usable population of these technical resources. Or will soon. With the retirement of the brain trust of the industry, and the universities not producing anywhere near the replacement number necessary, the increased deliverability and greater demand for the technical resources for each incremental barrel of oil produced a critical shortage will soon demand that these technical resources will become too rare, too costly and too unavailable to maintain, not to mention, unable to expand the deliverability of the North America based industry. 

In addition to this limited technical resource supply we also believe that the producer firms are at a point now where the costs of their scientific engineering and geology needs are growing beyond their commercial grasp. Nonetheless, a decidedly higher level of specialization and division of labor will be needed in the areas of earth science and engineering in order to increase its throughput from this resource. It is the unshared and unshareable makeup of these capabilities that we find the difficulties once again. Producers need these technical resources for a variety of just-in-time purposes, as operators, for their highly technical areas. If we assume that across the industry the utilization rate of these technical resources are at 75% due to organizational inefficiencies. Then by releasing that other 25% and deploying that unused and unusable capability more effectively we’ll have what I believe to be the second aspect of the solution of these pending and most certainly future difficulties. Achieving a minimum of a one third increase in the capacity with higher output from improved specialization and division of labor, providing us a good start to solving this difficulty. The question therefore arises what are the producers distinct competitive advantages. They are their land & asset base, and the coordination of the markets earth science & engineering resources.

People, Ideas & Objects et al have implemented a variety of changes within the Preliminary Specification. The first is to consider the producer firm from the time the Preliminary Specification is operational, to have two sources of continuing revenues. The oil & gas sales and the revenues earned by all of their earth science and engineering capacities and capabilities being deployed and employed in the form of a revenue generating capacity. Whether that be to one of the producers own Joint Operating Committees, or in the consulting of the individual to other producers / Joint Operating Committees, as a client, of which they may / may not have an interest in. Due to the specialization and division of labor demands producers will need to have chosen to specialize or acquire a specific capability on the basis of the distinct specializations and competitive advantages they hold or desire. These producer specialized technical revenues will then offset these engineering and geological costs incurred and will be directly charged to either their Joint Operating Committees or other producer clients who need to augment their needs with other specialized services. 

In terms of an opportunity in this new oil & gas industry this second source of technical revenue may be seen as the initiation of the start up oil & gas producer firms' initial revenues. More than that they’ll be able to offset some of the additional costs of the head office burden that are not considered part of the Cloud Administrative & Accounting for Oil & Gas. And this will apply to all producers no matter their production profile. When producers are specializing on their distinct competitive advantages, and all producers including Exxon, Shell and Chevron will need to do so, the demand for outside technical resources will be required to augment their diverse needs. The ability to offset some of their engineering and earth science costs with direct revenues of a non oil & gas revenue source. And the ability to access only the administrative and accounting software and services they need when they need them works to defer much of that base load $3 - $5 million dollars of overhead that is an inhibiting factor to the startup and junior oil & gas producer success. 

In a world where software has to define and support the organizations that exist. This is some of the “what, how and why” we’re able to provide North American oil & gas producers when the Preliminary Specification is delivered. The facility most responsible for this capability of making direct labor charges to the Joint Operating Committee is what we are implementing in the industry is our Work Order. Officers and directors may claim that charging labor directly is already available through the systems they use. Which is true they are able to allocate their labor costs to the field. However not with the necessary features of raising it to the point of making it a defined technical revenue stream of the firm. And the feature of making it a system that interacts throughout the industry. Allowing for the interactions between the resources they need and where they need them. Subject to the appropriate approvals and governance. Or enabling the second defined purpose of the Work Order system in order to enhance the industry wide innovativeness through the establishment of working groups etc. Our Work Order system is able to bill its costs at all times to either corporate overhead, Joint Operating Committees AFE or to a lease. Therefore the billable time of the individual engineer or geologist would be deployed within the producer 100% of the time they were working for the producer. And this is an inherent part of people beginning the establishment of their own producer firms which rely on their talents of their much needed earth science and engineering capacities and capabilities, not their skills in attracting capital.

Oracle CloudWorld 2022 Conference

It was during this conference where Oracle announced what I consider to be the next phase of the Enterprise Resource Planning (ERP) evolution. My perception of what was announced is a new direction where the overall technological architecture is accepted as mature and capable to undertake this phase and that technology can begin to bring substantial value to clients through Oracle Cloud ERP. When I look at the overall landscape in business today I see many decades of iterative development work that can be done which is similar to what is now available for the North American based oil & gas producers by adopting the Preliminary Specification. It may be that we are beginning what will be considered the era where the promise of Information Technology is realized. 

There is a specialization and division of labor between Oracle and People, Ideas & Objects, our user community and their service provider organizations. Oracle is focused on building value for their clients through the development and implementation of generic business processes, applying the principles of specialization and the division of labor, standardization, objective process management and automation to. The Preliminary Specification focuses on these same methods to develop value for North American producers in the oil & gas business. Therefore the combined approach of Oracle and People, Ideas & Objects et al are covering off all aspects of the producer's business needs. Such that we state “It’s not enough to own the oil & gas asset anymore. It’s also necessary to have access to the software & services that make oil & gas profitable.”  The significance of Oracle CloudWorld 2022 is that any operation in any business across the globe will need to operate on Oracle Cloud ERP or face the inability to compete or profit from their operation. I do not see a viable alternative available in the market.

How We Should Define Failure

 I can announce today that the Committee to Herd Cats has been unable and unwilling to support the development of the Preliminary Specification. The extent of their confusion extends to the fact that I’ve received no communication from them at any time. We can read many possible alternative suggestions as to why this may have occurred, a panic has driven them to inaction, they’re satisfied with the status quo or alternatively they may see it as I do, that the Committee members are fine and they thank you for asking. People, Ideas & Objects offer to conduct these developments has not been accepted as submitted. We will therefore await the opportunity to entertain an offer in some form in the future. 

We noted the shale wealth endowed in North America had been diverted to satisfy the officers and directors personal financial compensation and desires. Today there is not much value left in the industry and it is reasonable to call what the state of affairs are. Being an inability to deal with the future, its opportunities and most particularly its issues. People point out that there are still the reserves, which is the case. However, the officers and directors have no plan, no understanding and no ability to produce them profitably and therefore what value are they? And furthermore where will the money come from to produce them? The most difficult issue is the societal issue that shows these officers and directors have placed the consumption of energy, by the most powerful economy ever known to man, into serious jeopardy. This winter we’ll see difficulties in Europe however North America will not face any deliverability or storage issues. The difficulties for North America are the time that’ll be needed to turn things around from where we are today. If we assume that oil & gas exploration and development is a seven year process from concept to production. What condition is that process in today?

In the service industry and subsequent tiers of industries involved in providing and supporting the oil & gas producers. What is represented in oil & gas today is inaction through their systemic “muddle through” culture. And the officers and directors are obviously hanging their hat on the continuation of this “tried and true” policy. The difficulty is that the industry and the various sub-tiers are in an advanced state of disarray and have proven they’re capacities and capabilities are severely deprecated. As with the producers' own investors and bankers, the operators within these subsequent tiers of industries do not trust, believe or have any faith in the current producer officers and directors. Everyone feels they’ve been played for fools and betrayed for decades by them. Eventually the service industry and others were left to deal with their own shareholders and bankers as if they were involved in completely unrelated businesses when producers ran the oil price to negative $40. Producers slashed field activity to save their cash on top of years of reducing demand, which proved to be too much for the service industries organizations to survive. Being forced to layoff their staff and cut up their equipment to pay for the rent and lights. To find the equipment and the people today won’t happen when their bankers and investors saw the equipment they financed dealt with in that manner. The attitude in the service industry is the producers broke it, they can fix it, why would they volunteer to pay for their equipment twice? And they see no acceptance of that responsibility.

Coincidentally what officers and directors did in their producer organizations when their investors ceased funding their unending ask for more capital. They began suspending those operations involved in the first year of that seven year process. Those people and talents may be lost just as the field personnel and talents have been lost. That was during 2015, in 2016 they did the same for the second year of the seven year process. Fast forward to 2022 what’s contained in work-in-progress? 

Initiative, entrepreneurship, innovation and action to deal with the industry issues is seen as just more of the same old “muddle through.” No one is going to do anything about it as the producer officers and directors only explore greater and more elaborate forms of innovative, executive compensation. For example, one might look at People, Ideas & Objects and our decades long pursuit of zero revenues. All in an attempt to enhance producer profitability. Oil & gas producers are leaderless. Who will be the next to step up in this environment?

To suggest that we had an opportunity to raise our budget at any time takes the better part of all my enthusiasm and optimism. It's a difficult situation we’re in and I’m more aware of that than anyone. At the same time I’m not confused about the situation in oil & gas. As to if or when the North American producers will be able to get a handle on their difficulties. There’s no acceptance there is an issue and they refuse to accept that action is required. We’re in an interesting period that has enabled them to be more obstinate than at most other times. Times are somewhat better than the past decade, and times like these have certainly appeared over the past, what I would estimate six of the last thirty six years. They’ll suggest that this time is different and I would agree with them. The scope and scale of production and deliverability in North America is far greater and will therefore be more difficult to maintain, the devastation in all of the associated industries and lastly, the future deliverability due to shale’s steep decline curves as we move closer to extinguishing the work-in-progress inventory provide for what I assume to be an interesting future. I am unaware of the plan or even if there is one.

The consequences of the producers' officers and directors (in)actions will now fall where they may. We don’t know where the industry’s headed. They don’t appear to me to have a plan as their prior plan to move to clean energy has failed spectacularly. Giving up on oil & gas two years ago may now have sealed their fate as they don’t have a viable vision of how to make the industry profitable. I’m suggesting these issues will now be determined in the next few months for them, since they have no capacity to do so on their own. 

My standard warning is restated here that my Intellectual Property surrounding the Preliminary Specification and elsewhere is not to be used in any manner by producer firms. They are not authorized and will not be authorized to do so. They chose not to and will need to live with the consequences of their decisions. Other software firms revenues are dependent on their Intellectual Property and are not going to violate other firms IP, if it only diminishes their value in the long run. We’ve only ever seen a stand still, “muddle through” approach by the North American producers. We expect that to continue with little upside for anyone else outside the producers, officers and directors. Stated simply, an industry where bureaucrats have achieved their definition of nirvana. 

OCI Revised Organizational Constructs, Part II

 The Joint Operating Committee

The first organizational construct that contributes to our value proposition is the use of the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil & gas producer. The Joint Operating Committee is the industry's legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. When we move the compliance and governance frameworks of the producer firm away from the hierarchy and into alignment with the seven frameworks of the Joint Operating Committee, we’ll achieve an increased organizational speed, innovativeness and accountability in producers. Continuing on with the theme of this wiki page of “what, how and why” we do that, these are some of the advantages that are gained.

Adoption of the culture of the oil & gas industry in the form of the Joint Operating Committee is one of the fundamental changes that we’ve made in our ERP system. By doing so we’ve changed everything that is currently done in oil & gas administration and accounting and reconfigured it around what is unquestionably its cultural method of exploration and development operations. Creating an opportunity to provide a solution to these issues and take this once in an industries lifetime opportunity to move back to the more natural flow of the oil & gas business, focused around the seven frameworks of the Joint Operating Committee.

Our research taught us that when alignment of compliance and governance with operational decision making occurs, accountability is the result. This is intuitively understood. We believe this to be a source of conflict throughout the oil & gas industry today which creates an atmosphere and culture of unaccountable decision making. The contradiction occurs when operators assume the responsibility of managing the Joint Operating Committee based on the need to have the requisite capabilities available to conduct the necessary field operations. The Joint Operating Committee holds the operational decision making authority which is then delegated in the operating procedure to an operator based on the results of voting by its producer participants. A threshold percentage is established for any decision to be passed. Let's assume 60% is the required percentage for approval and the operator has a 33% working interest. Decisions are then made on this basis, AFE’s are issued, funds are spent and the initiative fails. Who’s responsible and who needs to be accountable for the difficulties experienced? We believe this to be the root cause of a related issue we identified in our discussion regarding Specialization and the Division of Labor. When producers have never been held accountable for the day to day individual field decisions that were made, during any period of their tenure at the producer, why would they then be held accountable for any decisions when they’ve assumed the officer or director roles in the firm? Just “muddle through.” It is the culture of the industry which developed over the past six decades that underpins this unaccountability. In its place a culture of excuses, blaming and generation of what we call viable scapegoats is the product of this lack of accountability. To resolve this the Preliminary Specification aligns and implements the Compliance & Governance module to the operational decision making framework of the Joint Operating Committee to establish a new culture of accountability for the decisions that are made.

The next point is related to the accountability issue and to other issues around the resource restrictions that are looming in the earth science and engineering resource supply. Professor Richard N. Langlois was an extensive source of primary research we used throughout the Preliminary Specification. His research is in the area of Industrial Economics and the Economics of Innovation. He raises what he calls the agency issue or rights assignment problem in his working paper “The Austrian Theory of the Firm: Retrospect and Prospect.”

The question then becomes: why are capabilities sometimes organized within firms, sometimes decentralized in markets, and sometimes coordinated by a myriad contractual and ownership arrangements like joint ventures, franchisees, and networks? Explicitly echoing Hayek, Jensen and Meckling (1992, p.251) who point out that economic organization must solve two different kinds of problems: "the rights assignment problem (determining who should exercise a decision right) and the control or agency problem (how to ensure that self-interested decision agents exercise their rights in a way that contributes to the organizational objective)." There are basically two ways to ensure such a "collocation" of knowledge and decision making: "One is by moving the knowledge to those with the decision rights; the other is by moving the decision rights to those with the knowledge." (Jensen and Meckling 1992 p. 253). p. 6

Oil & gas has a looming crisis in its ability to source the appropriate level of engineering and geological resources available to it as a result of retirements, low numbers of graduates, higher production throughput and greater volume of work necessary with each incremental barrel produced. People, Ideas & Objects therefore questioned whether the ability of each producer firm would be able to continue to establish the full suite of their in-house earth science and engineering capabilities and capacities at the level necessary to meet all of their needs, just-in-time, on a go forward, commercial basis. This would be particularly difficult when the solution to the shortfall in resources can only be resolved by a revised specialization and division of labor. Producers would not be able to commercially sustain the burden of a full suite of operator capacities and capabilities with such a diverse demand after specialization and the division of labor. And therefore we concluded the control or agency problem would need to be resolved on the basis of the knowledge being transferred to where the decision rights were held. It is specifically in the Research & Capabilities, Knowledge & Learning and Resource Marketplace, but also throughout all of the modules of the Preliminary Specification that we’ve moved the knowledge of each of the participating producers in a Joint Operating Committee into alignment with its operational decision rights. Where it is then possible to pool the available and specialized technical resources of the producer members of that Joint Operating Committee or available in the specialized market.

A secondary point I would raise is the definition of capabilities. Professor Langlois has provided the following definition from his paper “Modularity in Organization, Technology and Society”.

This is the basic modularization of the market economy. It accords well with the modularization G. B. Richardson (1972) suggested in offering the concept of economic capabilities. By capabilities Richardson means "knowledge, experience, and skills" (1972, p. 888), a notion related to what Jensen and Meckling (1992) call "specific knowledge'' and to what Hayek (1945) called "knowledge of the particular circumstances of time and place." p. 27

To which we’ve humbly suggested that “ideas” be added to that list. We also have Professor Carliss Baldwin noting that “knowledge begets capability and capability begets action.” 

What will become of the oil & gas earth science and engineering related capabilities and capacities now that officers and directors have cast their future to clean energy. Renouncing shale and casting it to the back seat of the bus where no one will see or hear from it again. Shale being what can unquestionably be the most advanced science the industry has ever seen or developed. Shale technologies will at best develop no further, atrophy or be cast to the four winds. I’ll reiterate that People, Ideas & Objects have a plan to make shale commercial in the energy independent North American market in the form of the Preliminary Specification. Shale is a critical and highly necessary element of North America's energy independence. 

Officers and directors of producer firms have to stop reading the tea leaves as to what they believe investors want. Investors want profits, everywhere and always, and that is all. With their contrived positioning of clean energy and environmental concerns I would ask what is it in oil & gas that will be the new frontier if it is not clean energy? Offshore, the arctic or conventional, maybe heavy oil or any of the other areas producers previously renounced as commercially viable? It is this focus on clean energy that will do more damage to the industry and seal the fate of the existing producers. What message is being communicated to their investors in oil & gas or its related service industries. Let’s assume the service industry is looking for capital for a driller to build a new rig. Their potential investor’s first question would be “why? Producers aren’t focused on oil & gas, it's clean energy.”

In a related manner, if investors haven’t seen any effort by the officers and directors to make shale commercial, don’t see producers investing in their organizations profitability or remediating any of the damages, what message does that send?

People, Ideas & Objects have repeatedly stated the fact that each boe provides 10,000 to 25,000 man hours of equivalent labor, or 28 to 71 times the entire world's population. Producers' capitulation of shale resources should be seen as irresponsible when we understand that it’s the world's most powerful economy that is the largest consumer of energy. Why aren’t officers and directors seeking to make shale profitable and accountable by adopting the Preliminary Specification? It’s reasons such as these that the people who are elected to the boards of directors are given such responsibilities. Selling to energy consumers the immense value they gain from their use of oil & gas and taking the political high ground away from government actors and environmental groups. 

In terms of alignment of the legal framework of the industry. The Joint Operating Committee is the representative organization that is established for the partnership between producer firms in any and all oil & gas properties. It is the standard method in which industry operates and all agreements and understandings are on the basis of the work done through these joint ventures. It is a rarity that a producer firm will have a 100% interest in a property. The diversity of producers in these holdings are necessary to mitigate the producers financial risk and due to regulatory requirements demanding specific land holdings etc in order to drill and produce. Current accounting systems report on Joint Operating Committee activities however People, Ideas & Objects et al have expanded the accounting and administration of these organizations to the level of stand alone reporting entities. Producing detailed, actual, factual financial statements each month for each Joint Operating Committee. It is therefore in that manner that we’re able to evaluate the performance of the property on the basis of its actual cost on a competitive basis of what the North American capital markets expect. By ensuring that each Joint Operating Committee remains profitable on a monthly basis by not overproducing based on commodity price information. 

The need to have standardized accounting is necessary from the point of view of having industry rely on the outcome of these methods. Objectivity is achieved as the ability to deal with distinct situations or “manage” producer's data is counter productive due to the global dependence on the data. Consider the process of balancing the production data across the month, across a gas plant with 1 bcf / day processing. Consideration of the elements and needs of the industry and having them captured in the software is a necessity for this reason. The benefit of this strict interpretation is that when it’s reported that a property is not profitable according to our Cloud Administration & Accounting for Oil & Gas’ standard and objective accounting. The producers in each of these Joint Operating Committees will know it is in their best interest to shut-in the property for the short term. They’ll know the property was assessed on the same basis as all the other oil & gas properties throughout the continent and be satisfied with the understanding of the nature of that standard and objective accounting. They will know and be satisfied with the determination of profitability or loss, its impact on their organizations performance, their influence on the processes of determining that standard and objective method and govern themselves accordingly. And therefore increase their organizations performance by only producing profitable properties and to innovatively work within that framework and understanding to increase the value of the property.

It's no longer enough to own just the oil & gas assets. It’s also necessary to have access to the software in the form of the Preliminary Specification which makes the oil & gas assets profitable. We are configuring an industry of successful producer and service industry organizations based on the issues that have caused systemic failures that are and will continue to dictate future difficulties. Non participating producer boards of directors in this initiative will have told their shareholders they’ve opted out of an investment being made in their organizations profitability, accountability and performance.

OCI Revised Organizational Constructs, Part I

 People, Ideas & Objects Preliminary Specification contains seven Organizational Constructs that are identified, supported and in a constructive manner, constrained by them. Incorporating these within ERP software allows users of our Cloud Administration & Accounting for Oil & Gas software and services to impute an understanding of the behavior and expectations of what is required by the producers and industry. Providing people within the industry with an understanding of “what, how and why” they’ll be able to use People, Ideas & Objects, our user community and their service providers to build value throughout the industry. In a decentralized environment, deferral of the operation away from the bureaucracy should not imply a loss of control. ERP software, and to a greater extent the Internet, become the means in which organizations are able to operate and achieve organizational performance trajectories that are superior to today’s. Our seven Organizational Constructs can be seen as both the enablers of that performance and the means in which to maintain the necessary control. 

People, Ideas & Objects identified the lack of real profitability in the producers was to be felt across the industry but also with everyone involved across the greater oil & gas economy. Profitability is the largest source of financial support that an industry has access to. This is now well understood and appreciated throughout the greater oil & gas economy. The efforts of everyone whether that be time, energy or money have been wasted by the self interests of producer officers and directors. The capitalists focus on profits being earned by investors is therefore appropriate in any and all cases. When investors are satisfied, they are there to provide prosperity for all those associated within a profitable industry in the short and medium terms, and for the future. When they’re not satisfied, they are quickly able to leave, sending the ultimate message of disapproval of the activities being carried out. It is our belief that investors, as were others, were duped for several decades by specious accounting that did and continues to misrepresent the performance in the producer firms. Accounting and reporting that aggravated and hid the abysmal performance of the industry for a protracted period of time. Leading to the comprehensive exhaustion of value from the industry. What is represented today in the financial statements of the producers would not be something to be proud of. Producers' financial statements reflect they are in serious medium to long term financial jeopardy. And none of today's financial statements are representative, they are as specious as they’ve ever been. Built on the promises of “building balance sheets'' and the ridiculous notion of “putting cash in the ground.” 

People, Ideas & Objects have been able to document the fact that chronic overproduction has been the source of a lack of real profitability throughout North American oil & gas since at least the July 1986 oil price collapse. Secondly, we noted that the Preliminary Specification published in August 2012, addresses overproduction specifically with a direct ERP software and services solution to this issue which generates profitability everywhere and always. Overproduction has been the systemic cause of the financial destruction in the industry for all but 6 of the past 36 years. Which dramatically contrasts the healthy compensation of the officers and directors over this same 36 year period. People, Ideas & Objects have also stated, repeatedly since May 2004, that software defines and supports organizations. Therefore any organizational change will have to be made in the ERP software first or the organization will regress to that which is defined in the current software that's used. The producers have used this knowledge to secure their franchise by not sponsoring any ERP software developments in the industry. Leaving them uncontested in their method and means of “governance.” Today we know that given the ultimatum of committing to the development of the Preliminary Specification, and therefore establishing an overall method of increased dynamism, innovativeness, accountability and profitability everywhere and always in North America. Producer officers and directors on August 31, 2021 chose to ignore the opportunity and stay the course. 

It can go by any number of different descriptions. “Cut and run,” “bail” or “cut your losses.” The one consistency in all of these is the fact they define failure. Shale oil & gas has now been deemed a failure by the producer officers and directors. They’re getting out, selling properties and writing down those shale assets that alleged such promise in all of those investment offerings. It’s on to the real thing now with clean energy and they’re making the transition with the oil & gas revenues established by prior investors in an irresponsible and unauthorized fashion. Revenues that need to be used to rebuild the industry and prepare for what is unquestionably the most difficult future oil & gas has ever faced. 

Our white paper published on July 4, 2019 entitled “Profitable, North American Energy Independence -- Through the Commercialization of Shale” suggests a means and method in which the industry could turn shale profitable. Upon review the producers refused to consider the initiative. It is far easier to excuse this or that, blame others and create viable scapegoats as to why others have failed them then it is to act. Only nine months after our White Papers publication their chronic overproduction dropped the oil price to almost negative $40 and refiners forced them to shut-in production. An argument they made against the Preliminary Specification that shutting in production would damage the formation. An argument that has now been proven to be false with no formation damage realized anywhere. Within two years of our paper's publication; was it acceptable to declare that shale would never be commercial and to just walk away from the catastrophe they had created, to then venture off into the clean energy industry that has proven never to be profitable? A place where accountability and performance are secondary to saving the planet, or what could best be described as bureaucratic nirvana. Or do they have a plan to make clean energy profitable? 

Why was it acceptable that officers and directors felt they could saunter off and forget about the serial failures they’ve created? Especially when there was a plan in place to make shale commercial. Who should hold them responsible and accountable? It should be the boards of directors. This behavior is unacceptable and reflects their history of walking away from all of their failures, not recognizing the need for profitability or understanding what is required to earn it. Oil & gas revenues will be needed to rebuild the industry from the damages that have been caused by these inactions. They’ll also be necessary to fund the future demands of the industry, not some far off unknown that producers have no basis of understanding about, capability, capacity or competitive advantage. Oil & gas’ diversion of revenues to clean energy is a fraud.

Summary of our Seven Constructs

We begin with a summary of the seven primary organizational structures in the Preliminary Specification that support the dynamic, innovative, accountable and profitable oil & gas producers and industry. These define the “what, how and why” of the Preliminary Specification from the highest level of its architecture. But most of all adopts a serious approach to the business focused on profitability everywhere and always. What would commonly be considered the behavior and culture of a successful business. 

The first Organizational Construct is the use of the Joint Operating Committee. Tying into the industry culture of the Joint Operating Committee and its seven frameworks enables an alignment between all aspects of the oil & gas exploration and production process. Creating a dynamic, innovative, accountable and profitable oil & gas producer and industry when the hierarchies compliance and governance frameworks are moved into alignment with the Joint Operating Committees legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks. The results are an organizational speed, innovativeness, accountability and profitability over today's base case. 

Our second organizational construct is the implementation of Professor Paul Romer’s “New Growth Theory” around the implementation of “non-rival” goods. Oil & gas can generate real value through implementation of sharing and shareable infrastructure such as cloud computing provides and People, Ideas & Objects are doing by implementing Cloud Administration & Accounting for Oil & Gas. Professor Romer’s theories are integral to our organization and we have captured this in our name which is representative and derivative of his theory.

A variable cost industry based administrative and accounting capacity and capability replaces the individual producer based capabilities whose infrastructures are individually replicated throughout each of the producer firms on an unshared and unshareable basis. Therefore substantially reducing the individual producers and overall costs of North American oil & gas exploration and production overhead.

Specialization and the division of labor make up the third organizational construct recognized in the Preliminary Specification. In terms of generating value, these were the only means western economies have been able to build value for the past 246 years. Turning the administrative and accounting capabilities and capacities into industry based variable costs, variable based on profitable production, which will enable these non competitive attributes of the producers to achieve three critical features over today’s business model.

The reorganization of the producers accounting and administrative resources into our user communities service provider organizations turns all of the producers costs variable based on profitable production. Which brings about the ability for producers to shut-in unprofitable properties and therefore maximize their corporate profitability.

Variable overhead costs are covered by profitable production or never incurred. Overhead costs are therefore recovered in the current period and a “cash float” is created to pay these ongoing costs. (Today’s capitalization of overhead does not replenish the cash incurred for the current overhead costs for decades. And, hence the need for the past chronic and annual demands on investors for more investment capital.)

The structure of People, Ideas & Objects software development capabilities, our user community and their service provider organizations provide producers with an iterative and incremental means to improve specialization and the division of labor consistently over the long term. Providing greater industry throughput from the same resource base. 

Intellectual Property is the fourth Organizational Construct of the Preliminary Specification. It provides a legal framework that exists in North America that enables the rapid and effective development of the science and technology basis of the oil & gas industry. The brilliance of this American system is the root cause of their economic dominance. Using Intellectual Property which is part of the U.S. Constitution, seeks to educate, inform, allow others to stand on the shoulders of giants, to protect entrepreneurs and innovators work while they do the difficult tasks of developing the much needed solutions to the difficult issues industry face today. Another distinct benefit is it dramatically reduces the unnecessary costs of innovation by eliminating the “me too” and repeated organizational mistakes that are made when innovation is disorganized and unfocused. 

The reason People, Ideas & Objects et al needs to be concerned about the startup to junior sector as much as any other classification is purely for the fact the industry’s rebuilding will be done on an innovative basis. Innovation is the basis of the Preliminary Specification. It enables People, Ideas & Objects, our user community and their service providers to achieve our two opposing objectives of providing oil & gas producers with the most profitable means of oil & gas production everywhere and always, and providing consumers with the lowest possible cost of an abundant energy supply. We do this with our decentralized production models price maker strategy that ensures all production is produced profitably. Including Exxon’s, Shell’s and that startup oil & gas firm that began this morning. And to do so innovatively to ensure that the ever escalating costs of oil & gas remain affordable to consumers and the commodities production profile and reserves continue to expand by achieving profitable, North American energy independence, everywhere and always.

The sixth Organizational Construct that we’re incorporating into the Preliminary Specification is markets with the three specific markets that are dominant in the oil & gas industry. These are the Petroleum Lease, Financial and Resource Marketplace modules. Each seeks to provide a virtual representation of the market that exists in the industry with the facilities of a fully enabled ERP system supporting the activities and actions of the producer firm and Joint Operating Committee. When we’re moving from a centralized to a decentralized method of organization through enhanced use of the Internet. The dependence of the firm shifts from its internal use to a much greater use of markets. To enable these market facilities within the Preliminary Specification is a capability that enhance the producer firm, Joint Operating Committees and industry. 

The last Organizational construct of course is the Information Technologies themselves. People, Ideas & Objects are not offering the latest version of a new wizbang technology. We are focused on the business value of the oil & gas industry. And enabling that through the now mature technologies that have developed in the IT market space. The value we generate from IT is substantial and is noted here as a full Organizational Construct not only as a stand alone benefit but also as an enabler of the other six Organizational Constructs. 

The specific value from the IT Organizational Construct that we’ll bring about is expanding the Cloud Computing paradigm. Bringing about an administrative and accounting capacity and capability through our Cloud Administration & Accounting for Oil & Gas software and service. This eliminates the producer's high capital cost in terms of establishing the capability, with substantial technical difficulty and brings these down to a low variable cost incurred only when profitable production occurs. Extending the shared and shareable cost model throughout oil & gas administration and accounting. 

From our point of view these are the approaches that we need to take to begin dealing with the serious nature of the difficulties in oil & gas. This is the approach that will yield the lower cost and higher quality innovative and profitable producers everywhere and always that we’re seeking. Setting a foundation for continuous iterative performance improvement.