Abstract



People, Ideas & Objects Preliminary Specification provides a comprehensive vision of the future oil and gas industry, producer and service industry provider. The Preliminary Specification is a cloud computing based, eleven module ERP software system that defines and supports the Joint Operating Committee and three marketplaces as the key organizational constructs of the dynamic, innovative, accountable and profitable oil and gas producer. Our solutions competitive advantage is that we provide the oil and gas producer with the most profitable means of oil and operations. 

Our vision is comprehensive and is detailed in the 175,000 words contained here within the modules of the Preliminary Specification. Our software defines and support a structured reorganization of the industry and producer firm. Through our decentralized production model we implement a price maker strategy that converts the industry from a cash flow focus to one of profits. Once the industry is profitable we then deal with the resource constraints of the earth science and engineers through our Resource Marketplace and Research & Capabilities modules. It is through specialization and the division of labor that we are able to expand the throughput of the industry from our constrained resource base. Then finally we will be able to approach the objective of achieving energy independence in oil and gas in the Canadian and U.S. marketplaces. Establishing the industry on the basis of profitably and removing the resource constraints of engineers and earth scientists that exist even today are the necessary precursors to achieving energy independence. That vision is what the People, Ideas & Objects Preliminary Specification achieves.

It is reasonable to look to energy independence as an overall objective. The shale reserves will provide for that. However, the way in which the industry is managed makes that objective unreasonable and unattainable. Bureaucrats have destroyed the financial foundation of the industry. Without significant capital to restructure the current industry, and significant capital to increase the throughput of the industry, the current bureaucracy is unable to achieve energy independence. They have never had that old time religion of earning profits. They have now proven over the course of People, Ideas & Objects existence (2003) the inability or desire to catch the religion of profits. Without establishing the industry on a foothold of profitability first and foremost there is not enough capital in the universe to achieve energy independence in North America while in the hands of the bureaucrats. 

The next twenty five years in oil and gas will be the most dramatic in its history. The demand for energy will ensure that prices remain high. Yet with the abundance of shale reserves the costs of providing that energy is much higher than conventional reserves. And with so many people joining the middle class we need to consider how the industry approaches this new energy era. Does anyone believe the current bureaucracy, with the financial destruction that they’ve caused in the marketplace today, will be the solution? Does that future involve an Information Technology perspective that is just a cost, or should it be a vision such as the Preliminary Specification provides today?

The key to providing this solution is that the Preliminary Specification is based on the industry standard Joint Operating Committee. The legal, financial, operational decision making, cultural, communication, innovation, and strategic framework of the industry. When we take the compliance and governance frameworks of the hierarchy and align them with the frameworks of the Joint Operating Committee we attain a speed, innovativeness, accountability and profitability that is desired in our oil and gas organizations. 

After all, as you will see, we are not talking about minor changes to the floor plan for accounting. We are exercising wholesale changes to the oil and gas industry by adopting the Preliminary Specification, and fully utilizing the Joint Operating Committee. Change that is as significant as that which is represented by the changes in energy prices, the global energy demand structure and shale reserves. Based on the research of Professor Giovanni Dosi and applied to the oil and gas industry, he asserts that the makeup of industries and companies is attributable not only to the endogenous force of competition. Innovation and imitation also make up the fundamental structure of an industry. “Market structure and technological performance are exogenously generated by three underlying sets of determinants.”

Each of the following three components are evident in the marketplace of an oil and gas producer today, as reflected in:

The structure of demand.
  • Satisfying the demand of the global energy marketplace is critical to the advancement of all societies. American and western as well as Chinese and developing societies face real challenges in sourcing adequate long term sources of energy. The long term demands on the energy producer over the next 25 years have never been so great.
The nature and strength of opportunities for technological advancement.
  • The nature and opportunities for technological advancement lead one to believe mankind has never faced the level of opportunity and acceleration that is possible today. The industrial mechanization of the past 100 years combined with the prospective mechanization of intellectual pursuits combine to markedly appreciate the value of human life. The availability of energy will be a critical element of this advancement.
The ability of firms to appropriate the returns from private investment in research and development.
  • The oil and gas industry is moving closer to its earth science and engineering principles. Innovation, research and development in both the producer firm and the service industry are and will become more commercial in nature. It is on the basis of success or failure of these factors that will determine the success or failure of the producer firm within the industry.
The role of software in society is becoming more pronounced. Today we are still in the beginning stages of what can be done. For an industry such as oil and gas to continue without the software development capabilities that People, Ideas & Objects are proposing, and the organizational structure focused on the Joint Operating Committee, the prospects look dim. It is People, Ideas & Objects claim that we provide the innovative oil and gas producer with the most profitable means of oil and gas operations. And we do. First by providing our software through the most cost effective manner. That is, charging our subscriber base for the one time costs of our software developments. A fundamentally different value proposition. And secondly, that in order to attain a higher level of economic output requires that the oil and gas industry employ higher levels of specialization and division of labor. To organize that specialization and division of labor requires the use of the software specified in the Preliminary Specification. There is no other means in which to organize a higher level of specialization and division of labor. The bureaucracy has now proven its inability to change or accommodate the speed of the marketplace. Therefore our claim to be the most profitable means of operations is valid. The only manner in which to move from the high levels of organizational methodology we currently enjoy, is to design and support a more sophisticated specialization and division of labor. And that is detailed in the Preliminary Specification. We need to take control of the production of the software in order to take control of the means of energy production. That is what People, Ideas & Objects user community based software developments is about. Thirdly, our development of the decentralized production model, as detailed in the Preamble, provides the oil and gas industry with the capability to allocate oil and gas production on the basis of profitability throughout the industry and obtain “price-maker” strategies. Production discipline provided from the Preliminary Specification is the necessary mechanism in the prolific and costly era of shale based reserves. Otherwise the industry and producers will continue to lose money due to overproduction.

When it comes to undertaking a large project such as People, Ideas & Objects Preliminary Specification. And we have costed the project at $6 billion in its initial commercial release. Is the need to maintain a sense of urgency for the people involved through to the end of the project. As we know, most of the people will remain motivated as long as the money keeps flowing. So how do we ensure that the money keeps flowing? It is through the fact that we provide the most profitable means of oil and gas operations that we can motivate the producers to maintain their sense of urgency in keeping this project funded and moving forward to its conclusion. The alternative is the current bureaucracy who have effectively eliminated themselves from consideration. In the future it may not be enough to own the oil and gas asset. It will also be required to access the software that makes the oil and gas asset profitable, that is the importance of software in today’s society. Our value propositions monetary value over the current bureaucratic offering is valued in the trillions of dollars. 

From the eleven modules there is an overall vision of how the innovative oil and gas producer, and the Joint Operating Committee would function in this new energy era. I had two comments made to me when I wrote the Preliminary Research Report. The comments were that “this solves every administrative issue in oil and gas for the past fifty years” and “it's an entire new discipline.” Both were related to the significance of using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer. What I think that we can say as a result of completing the Preliminary Specification is that both of these comments underestimate the significance of using the Joint Operating Committee.  

What we have discovered is that the Preliminary Specification certainly resolves the administrative and accounting issues when the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks are aligned with the compliance and governance frameworks. However, when it comes to the operational concerns of the oil and gas industry, it also provides the frameworks and means to solve those problems as well. Whether it is the ability to agree amongst the partnership and reduce production during commodity price declines, or moving the industry to a decentralized production model, where production and administrative costs accurately match revenues. Or where the innovation is generated through two major processes in the Preliminary Specification, which do not directly conflict with tight operational control. Or how the division of labor and specialization are enabled, defined and supported through the software to provide for the industry to expand its output from the limited resource base of earth scientists and engineers. These are just some of the features of the Preliminary Specification that impact the operations and enable the producers to enhance their organizations. And although they have been used to highlight today's operational issues they will also provide solutions for tomorrow's issues and opportunities. Today what we can state unequivocally is that the Preliminary Specification makes shale commercial.

Changing the innovative behavior of one producer carries a scope of change that is as broad and as diverse as is contemplated in the business world. Change at this scale in many instances can not be managed within the organization but needs to be managed through the forces of creative destruction in the greater economy. Producing natural gas at a loss was the beginning of this process. We have now seen natural gas producers continue to lose money for more than six years. Yet nothing has been done to address this issue. At the height of the issue we saw the bureaucracy pray for a cold winter. Solutions to the problem have not been discussed or provided, outside of People, Ideas & Objects, and the low natural gas price issues remain unaddressed in late 2016. The fact is bureaucracies can’t, won’t and will not ever change. Over the early years of the natural gas price declines the relatively higher oil prices were able to cover over many of the sins in the natural gas marketplace. For the past two years low oil and gas prices have put the industry and many of the producers in financial jeopardy due to both sides of the businesses poor performance. An anomaly that hasn’t happened before. We believe these are the beginning stages of the forces of creative destruction. People, Ideas & Objects offers the Preliminary Specification, our software development capabilities, user community and service providers as an alternative organizational structure for the oil and gas investor. 

A time of dynamic change driven by the organizational changes focused around the innovative Joint Operating Committee. How can a firm that has been developed in an era of cost control transform themselves into a dynamic, innovative, accountable, profitable and earth science & engineering capability focused producer? In many cases the will to do so might exist, however, with the speed and unforgiving nature of the business cycle, not much time will be provided to those that attempt the transformation. We see in this world the capital markets reflecting many interesting phenomenon since the financial crisis of 2008. To suggest any trend or definitive result from these would be premature. It's just a different world in terms of being an oil and gas CEO or CFO than it was before 2008.

The Preliminary Specification includes in its definition Oracle Corporation’s technologies. If you read or review any of their material it has a decidedly technological focus. If you mention the Joint Operating Committee within their organization you can hear it echo for a week and a half. They really have no fundamental understanding of oil and gas, and only a basic understanding of business. They have become very specialized in what they do and the products they sell. Such is the nature of the division of labor and specialization. What People, Ideas & Objects are therefore doing is filling a “gap” or creating a sub-industry in providing the business understanding of the oil and gas industry to the technologies of Oracle Corporation. This “gap” or sub-industry between the oil and gas industry and Oracle is something that is needed because the two are unable to speak coherently to each other, they need an interpreter, and that is People, Ideas & Objects and the Preliminary Specification.

McKinsey Consulting suggest that large populations will be joining the middle class in the next 25 years. This will have a dramatic effect on the levels of demand for energy. If the oil and gas industry fails to respond to these demands due to the bureaucracies lethargic ways, will anyone note that there were alternatives proposed?

People, Ideas & Objects is soliciting commitments to fund the development of the Preliminary Specification. Producers or investors interested in supporting these developments should review our Revenue Model and contact me here.

Further updates to this project can be obtained from here.