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(05) Implementation

Our Plan, April 3, 2017

Vision without action is merely a dream. Action without vision just passes the time. Vision with action can change the world. 

Joel A. Barker

In summary then, our plan is to start software developments of the Preliminary Specification on September 25, 2017. Key to the success of People, Ideas & Objects and the future of the oil and gas industry is our user community. Our user community vision reflects clearly our commitment to user community based software developments. It is there that the power and authority is provided to the user community to enable them to make the necessary changes in the oil and gas industry, producers and associated areas. People who are interested in participating in our user community are encouraged to begin the process of preparing their application. Action on behalf of the user community participants has begun. A reflection that there is a belief that change in the marketplace is needed and the status quo no longer builds any value. People are frustrated to the point of action. 

We have established a budget to fund the developments for the first year of operations. We are raising $100 million U.S. in revenue from sources that will participate in this solution. Producers,  oil and gas investors, whomever. This will provide us with 108 man years of funding to be divided equally between the user community, our developers and Oracle Corporation. The objective of the user community is to move the Preliminary Specification forward by beginning to fill out the details of what will be required. The Preliminary Specification as it stands today is a vision of what is possible. The user community will take this and in the first year build a strong framework of what is required. Defining what will be required from the user community in the years to come. 

We have set the objective that revenues to fund our entire development budget will be raised by the end of this initial phase in September 2018. Continuation of the work being done in this initial phase is a critical requirement of the industry to follow through on. This initial phase enables us to jump start the developments. The danger is that if there is difficulty in raising the remaining budget, people will not recommit after a cut in funding. This is not their issue, if the industry is unwilling to follow through on the resolution of its own issues then why would anyone else? Establishment that this oversupply and overproduction issue as a material, chronic and unresolved issue over the past decade, and in the 1980’s and 1990’s, is evidence enough that action is required. Only the industry generates the revenues necessary to fund our solution and are the key benefactors of our value proposition. Only the user community controls the Intellectual Property involved in that solution. 

Recruiting of our leadership team has begun with the objective that they’re in place September 2018. Positions in both the user community and People, Ideas & Objects will form our overall leadership team. These positions include the C class executives of both organizations, the approximately 20 product owners and others. 

People who want to have user community based ERP systems to use in oil and gas. Now is the opportunity to act. The opportunity to resolve what can only be considered as the largest issue ever in oil and gas. A decade has been lost in oil and gas already. People can be a critical part of that solution by participating in the user community. Contributing to society by establishing a profitable, productive and prosperous oil and gas industry where the next 25 years could be the most challenging and rewarding. This is that opportunity and now is that time. No one is going to tell us to do it. We have to make this happen ourselves and deliver it to the industry. Rebuilding the industry brick by brick and stick by stick from this point forward. 

Our plan consists of a prosperous oil and gas industry. One that approaches the next 25 years as the best 25 years of the industry's history. A time where the industry achieves profitability in each one of those years. Funding their own capital expenditures, replaces and refurbishes the infrastructure that we see decaying with greater frequency on the daily news, a future in which the investors and bankers, past and present, are treated with respect and their money treated with the appropriate accountability and not used just to fund the discount to the energy consumer. An energy future where responsible people are making the appropriate decisions at the appropriate times and dealing with the opportunities and issues as they arise. An industry that doesn’t blame the Saudi’s or OPEC, a warm winter or just the way things are on their poor performance and lackadaisical “muddle along” strategy and “do nothing” operating procedure. An industry that has respect for those who have committed their careers to the professions in the industry and expect to have more seniority than what casual labor has in the construction industry. An industry that has respect for the work that is done in the service industry and works hand in hand with those innovative and dynamic people who make the industry operate. And yes will actually pay the people who work in the industry and service industry on a timely basis. A place where it is not an honour and privilege to still have a job but a place where you can make a difference. Go here to read the details of our plan. And ask yourself, what’s the producers current plan?


Here is the development budget that was published in January and February 2014. This is the software development budget necessary to take the Preliminary Specification, complete with the user community, to the initial commercial release of the product.  

Development Budget

Intellectual Property Royalties and Profit Margins

One thing about being in the software business is the healthy nature of the margins that are realized. For example Microsoft Office earns 73% profit margins for Microsoft. That also assumes you are able to attain the point in your business that you actually earn any revenues. The real downside of the software business is that all of your costs, the actual cost of development, is conducted without the benefit of any revenues. So you have to incur the costs of development before you get to the point of earning any revenues. Such is the way of the software business. And with People, Ideas & Objects large scope and scale, and the small market for ERP systems that the oil and gas producers make up, we have implemented a Revenue Model that is fundamentally different than most software companies. That is, we are developing the software with revenues from the producers. As the scope and scale is beyond the capabilities of the investment community. 

Nonetheless the lead times to get to the point where the revenues are realized are significant. I started working on developing oil and gas systems in May of 1991 and signed my companies first comprehensive development agreement with Oracle in February of 1992. It is coming up to 25 years that I have had this vision of the Preliminary Specification rattling around in my brain. It represents a life’s work and a life’s investment. I don’t count the amount of money that I have invested in this software nightmare, but it is substantial. The point is I am either crazy or I’m right. And I am very satisfied with being crazy. 

So it is to the margins of our budget. I have allocated a 33.3% Intellectual Property Royalty, or $2 billion to myself, the owner of the copyright of all of this material. I know this will cause some backlash in the industry, you understand that I am satisfied with my position in life. Alternatively you can start with your own vision as I did in 1991 and enjoy the smooth and glorious ride that offers. Bureaucrats will hold this royalty out as a reason not to proceed. Denying the investors the almost $100 billion in annual opportunity costs that are lost by using their current business model. 

There are additional profit margins of 33.3% totalling $2 billion as well. These are the profits of the firm and are distributed as dividends to the shareholders. It is true that I control 100% of the firm and as a result these dividends will end up in my pocket. I provide oil and gas producers with the most profitable means of oil and gas operations. This is a tangible difference in our business model. The question becomes how do I realize this value that I generate for the industry? The shares are worthless. Once the development is done the revenues will fall significantly and define a much smaller capitalization. Do I have to sell the company to realize the value that I earn? The methodology defined above is the means that I choose to monetize my efforts, and is commensurate with the value that I provide to the industry. 


We move on from the User Budget Categories to the Developer Budget Category. In many ways this is a far simpler budget in that it maps directly to the user budget. That is each hour of user community time is matched with one hour of developer time. So the allocation of the time of the developers will follow exactly that of the User Budget Categories that we have already spelled out. The costing of the developers is at the same rate of $185 U.S. as the user community. The main difference is that user community is a third party transaction with an independent business, and the payment to the developers is to salaried personnel. The $185 therefore also includes our overhead for office space, administration, computers, networks and software, etc. 

We therefore have the same 1,000 to 2,000 man years of time, or $333 to 667 million budgeted for the developers for the term of the first commercial release. As we will see in the Oracle cost section we have additional developer time of 450 to 1050 man years of their developers joining the development. These are for a variety of reasons that we will discuss when we get to that budget category, however it is reasonable to assume that there will be some mixing and matching between the People, Ideas & Objects developers and Oracle developer categories in the user community. 

We have two additional budget line items in the developer budget. The first is “Product Owner” which are positions that are part of the developer team. For the type of development we are conducting these people will represent the user community on the development team. They have broad authority and responsibility and can affect changes to the development. They are the user communities representative on the ground in the development team. They will be selected for their industry experience and knowledge of the specific nature of the module or characteristic of that specific development team. Therefore they will be speaking the same language as the user community. They will be senior in terms of their education and experience and understanding of the oil and gas industry. They will also understand the technology. We have budgeted for 25 product owners, one for each of the development teams. Each product owner is provided with support staff and a discretionary budget. The costs for the anticipated three year term of the initial development is therefore $33.6 million. 

The second budgeted line item in the developer budget is for research. This is for oil and gas related research in terms of the work that has and will always be carried out by People, Ideas & Objects. We are a research and software development company. It is the ten years of research that we conducted into the use of the Joint Operating Committee that has brought us to the Preliminary Specification. It doesn’t stop here. As we mentioned yesterday the Preliminary Specification is a framework for solving problems. Expanding our research capabilities will help in providing some leadership and direction in terms of where the Preliminary Specification will need to move to solve future issues. We have therefore designated a budget of $10 million for the three year term of the development to provide for the addition of ten people. And therefore the total budget for the Development Budget Category is in the range of $375 to 710 million. 


Preliminary Specification

Security & Access Control

The first allocation of user community funds will be to the Joint Operating Committee User Budget category. Here we have allocated 22% of the user community budget for a range of $73 - 146 million. This works out to a range of 220 to 440 man years of work for the user community. It is important to take this budget allocation into context. These are the costs associated with the needs of the producer in its prototypical form based on the decentralized production model. Where the producer is stripped down to the C class executives, earth science and engineering resources, land and legal and support staff. It should also be pointed out here that the earth science and engineering resources, as well as the former administrative and accounting resources, which are now the service providers, each have their own user community budget allocations. These budget funds may be subsequently pooled to approach joint software development initiatives. Initiatives such as the Material Balance Report which have the producer firm and the service providers interests. 

One of the first concerns of the Joint Operating Committee User Budget category of resources has to be the Security & Access Control module of the Preliminary Specification. How much of this budget will need to be allocated to address the issues and opportunities that are addressed here. We are providing access to the right information to the right people at the right time in the right place on any device. This includes access from multiple producers resources accessing information within the various Joint Operating Committees that they have an interest in. We thankfully are able to rely on the strength of a variety of Oracle products at various layers within their technologies to assist us in making these opportunities possible. The difficult issue that is presented by the Preliminary Specification is the high levels of collaboration and integration that is being conducted by the various producer firms in the Joint Operating Committee. And everyone knows what I mean when I talk about the issues that are presented by the pooling concept and general high levels of collaboration through the product. What I expect from the user community is the ability to take these difficult requirements and make them effective in an environment where the user is enabled and supported in an environment that is constructive and informative. Not one that has the user accosted by constant warnings and pop ups that violate the sense of what a good system should provide. This is your system, don’t expect anything but the best. If the developers don’t deliver what it is that you want, tell them to do it again until they get it right. 

It is with that point that I want to note a number of positions that fall under the development budget. These specific positions are called the Product Owner. We currently have budgeted 25 of these positions and their role is to represent the user on the development team. If I didn’t have a job already I would want to be a Product Owner as they are empowered by the user community to ensure that their needs are met. These people are your “man on the inside” so to speak. There will be a product owner for each of the eleven modules, one for the user interface, and so on. 

And its not limited there. Additional resources will be provided to the user community based on their needs. We are developing People, Ideas & Objects to be user based software developments. This is not our objective for just the beginning, it is the objective for the life of the software. We expect to see significant change in the innovative and profitable oil and gas marketplace. This change will need to be accommodated by changes in the software and services that are provided by People, Ideas & Objects, the user community and the service providers. A constant level of change that will require the efforts of what we call this “gap” or sub-industry between the oil and gas producers and the technology companies like Oracle. 

It is at this point that I would like to note that the user communities will be comprised of a large variety of sources. Although some will definetly come from the oil and gas producers themselves, that isn’t the case for all of them. There may be some of the people who will have been moved to the service providers as a result of moving to the decentralized production model. Or from the service industry itself. The broader and more diverse the user community that we are able to build, the better the software that we will be able to build for them. That is our focus and that is our desire. 

Therefore that will be one of the first things the user community will need to begin to do. Is to determine the amount of budget that is necessary to meet the needs of Joint Operating Committee User Budget category for the Security & Access Control module. Understanding the scope of the issues, and that it includes the Military Command & Control Metaphor I have estimated the budget requirements in the range of $7 - 14 million 21 - 42 man years. It is important to remember that these estimates will be finalized upon completion of the initial phase of the development work. This is a $200 million phase that will determine the scope and scale of the project in its first commercial iteration. It will also determine the costing of each module based on defined user requirements. 

Resource Marketplace

Staying with the Joint Operating Committee User Budget Category we come upon the Resource Marketplace module and find a little relief from the heavy lifting found in other modules. That is to say the user community demands in the Resource Marketplace module are not critical in the module itself, however, there are demands of the user community as a result of the Resource Marketplace module in other User Budget Categories. Such as the Service Industry and Service Providers. Therefore what I see for the user community in this module is not so much a heavy lifting but more of a coordination of the users in the Service Industry and Service Providers. There will also be a number of synergies with respect to the budget requirements. Many of these other categories will have requirements for this module and a strong pooling of the resources of all of these categories should be undertaken at the beginning of the development. 

In saying that we need to point out that it is in the Resource Marketplace that the decentralized production model is implemented. It is here with the service providers that the prototypical producer will be stripped down to the C class executives, the earth science and engineering resources, the land, legal and support staff. Where the remainder of the producer firm will be permanently located in service providers who are focused on the process and provide their service, and their billing, to the specific Joint Operating Committees. The service providers have a specific User Budget allocation of $83 - 166 million to deal specifically with these needs. It will be these resources that will define the software that supports the processes within the service providers that will support the decentralized production model. It is the resources of the service providers, as a sub-industry, that will be accessed by the producers through the Resource Marketplace module. 

There is also shared development of the “Marketplace Interface” with the Petroleum Lease and Financial Marketplace modules. Therefore a pooling of user budgets can be made there as well. There is only one “Marketplace Interface” with elements of each of the marketplace modules components evident within the “marketplace.” There are a number of Oracle modules that also fit within this area. Purchase Orders and a number of other modules lay the foundation for a strong basis for the module. 

One area that will be a unique development will be the Job Order system that should be developed with the aid of the Research & Capabilities and Knowledge & Learning modules. Pooling of those User Budgets will assist in keeping the demands in the Resource Marketplace module down. In contrast I don’t see much of a role at all for the Work Order in the Resource Marketplace module. One may want to keep a very close watch on the developments of the Work Order in the Partnership Accounting and Accounting Voucher, but as for a direct involvement in the Work Order, a minimal budget allocation may be all that is required. 

I caution the users to recall that these are based on the understanding that I have of the modules and the oil and gas business. The reason that these are user based developments is that no one individual has the global perspective of the oil and gas business. Therefore I may be completely wrong. And if there is significant conflict between what is being stated here and what the user community wants in terms of budget allocations during the preliminary phase, then the user community should raise these points for further discussion. 

With that, and understanding the role of the Resource Marketplace, I think an allocation of $6 - 12 million, 18 - 36 man years, will provide the needs of the user community to complete the tasks defined in the Preliminary Specification. These budgeted resources are the allocation for the Resource Marketplace module only. The user community may pool some of these resources as discussed above for joint development efforts such as the “Marketplace Interface” and the Job Order. 

Petroleum Lease Marketplace

The Petroleum Lease Marketplace is where the innovative and profitable oil and gas producer manages half of their competitive advantages. Those being their land and asset base. It is in the Research & Capabilities and Knowledge & Learning modules that they manage the other half of their competitive advantages, their earth science and engineering capabilities. As a result of this the Joint Operating Committee User Budget allocation will be material to deal with the nature of the Petroleum Lease Marketplace module. There are few User Budget allocations to other areas that can be pooled within the Petroleum Lease Marketplace. Other than the “marketplace interface” and some small dependencies here and there the Petroleum Lease Marketplace is a stand alone module. However it is also one of the key modules in terms of the critical data that will be sourced by other modules. It is with that important role within both the producer firm and Joint Operating Committee that I have allocated a range of $8 - 16 million in User Budget, or 24 to 48 man years to the module.

It is with that in mind that we should note that certain processes will be moved to the service providers with use of the decentralized production model. Lease rental payments, surface rights payments and other processes that were the usual domain of the land and legal department are best removed from the producer and Joint Operating Committee and handed to the service providers. As with the Resource Marketplace module the users within the Petroleum Lease Marketplace module can involve themselves more in coordination of the users in the Service Providers User Budget allocation than a direct hands on development of those processes. 

One area that is new is the Material Balance Report that also falls within the domain of the Partnership Accounting and Accounting Voucher modules. This is a critical document that leads to significant automation of the processes within the producer firm and Joint Operating Committee. It will be heavily reliant on clean data elements regarding the partnerships and commercial arrangements of the producer and Joint Operating Committee. These data elements reside in the Petroleum Lease Marketplace and will be managed there. And these data elements will not just be at the boundary of the property. It will require a coordination of the data from the boundary of the producing property to the ultimate point of sale. A clean, clear and unimpeachable data set of all of the variables that are associated with anything and everything involved in the movement of the commodities. This data will need to be organized, captured, coordinated, scrubbed, polished and stored electronically. All with the associated processes to ensure the data elements are kept up to date. And done so from a global industry perspective. A task that I think we all can agree can and should be done. The issue that has held us back from this approach is that we have not had the time or resources to do this type of work. Reflecting on the importance of having the producers subscribe to the People, Ideas & Objects Preliminary Specification and make this real. 

Financial Marketplace

The key aspects of the Financial Marketplace module is to align the financial framework with the Joint Operating Committee and to have the producers capital structures perform beyond market expectations. To do this I have allocated the user community a budget of $5 - 10 million, or 15 to 30 man years. There are few areas where these budgets can be augmented by pooling them with other development efforts. There is the “marketplace interface” with the Petroleum Lease and Resource Marketplace modules, however that is probably all that there is. 

The speed that the producer is able to attain over their investments in oil and gas properties will need to accelerate. That is, the expectation that the producer will be able to accelerate their investments in oil and gas with less time and investment will increase. This performance will be difficult to attain and will require the producer to have the systems and procedures within their own organizations, the capabilities, to be able to compete within the broader business environment and within oil and gas. The user community will have to define what is required beyond the Preliminary Specification in order to support this critical producer capability. This is the type of area where the user community will be able to differentiate itself from the other systems and organizations that it, the user community, will compete with. It can tackle an issue such as this and resolve it in a way that would materially affect the outcome of the producer firm. 

And speed is nothing without control. The producers ability to maintain their capital discipline in an environment as discussed above will be of critical importance. How they do that is detailed to some extent in the Preliminary Specification but it is here again that the user community will need to determine “how” the producer firm can maintain control of the higher throughput in terms of investment capital. 

It is these tasks and budgets that the user community will undertake during the development of the system. Users who have special knowledge of what is required and how to implement the Preliminary Specification will organize themselves to define what is required. These budgets are healthy but the scope of the problems that are being addressed are the ones that need to be addressed in the industry. The budgets are primarily composed of user participant fees. There are other costs associated with the budgets but I expect that approximately 85% of any of the User Budget allocations are for the hourly fees that we have established. These fees are the $185 U.S. per hour that we have established as our rate for user participation. And these are not “employees” of People, Ideas & Objects. Our developers are employees and though we have costed them at $185 as well, there are elements of overhead and other costs in the rate which are needed to support the developers and the users. The users are paid directly $185 U.S. per hour as third party businesses that have a close relationship with People, Ideas & Objects. 

It is that close relationship that the user community has with People, Ideas & Objects that brings them to the user community. Some of the user community participants may be involved in the service provider sub-industry that we note will be created as a result of the decentralized production model. This requires the prototypical producer to be stripped down to the C class executives, the earth science and engineering resources, some land, legal and support staff. The remainder are moved to service providers who are focused on the process and use the entire industry as their client base. These service providers will be a large part of the user community as they are using the software in their day to day management of the processes of the oil and gas industry. Other members of the user community will come from the producers themselves, whether that is from a producer or a Joint Operating Committee both will be required. And some will need to be provided from the service industry. Lastly there will be some who are specialized in the needs of the user community itself and are exclusively employed in the community.

It may not be rare in the future that you will have multiple sources of revenue from different types of clients and the user community should be considered one of your roles in the future. Once we secure the funding for development and proceed with these developments the work of this community will be the critical element of success for the profitable oil and gas producer. 

Partnership Accounting

You would think that the last thing anyone would want to discuss would be the boring accounting modules. However, nothing could be further from the truth. According to the visitor logs of the Preliminary Specification its the Partnership Accounting and Accounting Voucher modules that are the two most visited modules. Accounting being at the heart of an ERP system being the probable source of this interest. It is in the Partnership Accounting module that a significant volume of activity is occurring. Therefore I have allocated a User Budget of $13 - 26 million or 39 to 78 man years of time. There are areas where these funds can be pooled with other User Budgets and that includes Compliance (Tax, Royalty, SEC), Service Providers, Service Industry, Accounting Firms, Engineering and Earth Science. Therefore the scale of these funds could be far greater than what they initially appear. Also, we are building upon the Oracle Fusion Middleware and Oracle Fusion Applications. Much of the “generic” accounting functionality already exists and only needs to be implemented in innovative ways. The Oracle Budget Allocation is also $333 - 666 million and includes hardware, software and services. It is these Oracle services that I know the user community would be of keen interest in the Partnership Accounting module. 

It is in the Partnership Accounting and Accounting Voucher modules that some difficult issues are presented. These issues are unique to the Preliminary Specification and are as a result of using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer. Within the Partnership Accounting module these issues include the Pooling of the technical resources, the Work Order, the decentralized production model, and the Material Balance Report. And these are just the large ones that I am aware of today. These will require significant effort in terms of their resolution. One thing that I have not mentioned to date and is of importance to the user community. Is that People, Ideas & Objects is a research and software development company. We will have a group set up for the continued research into areas of innovation and the Joint Operating Committee. Much the same as what we have done over the past ten years. These resources are also available to the user community to aid in resolving these larger issues and their implementation. 

The Pooling concept is a strictly mechanical implementation of the Joint Operating Committee. There are a few additional twists that are above the manner in which accounting is done today, and those dovetail with the Accounting Vouchers ability to have multiple producers charging costs / revenues to an open voucher. This can be done simply, or it can be done extensively. As it is conceived in the Preliminary Specification it is done extensively with the costing of the earth science and engineering resources, the ability to budget the departments revenues from commitments to the Joint Operating Committees etc. This is a second source of revenue for the innovative and profitable oil and gas producer and it is a means to source the appropriate technical resources for any properties operation. The ability of this system to accommodate those two needs should be an administrative capability that defines and supports these critical processes. 

The Work Order is technically and mechanically complex. If we only had to concern ourselves with the needs of one firm than we could implement this type of Work Order very easily. However the system needs to operate initially at the industry wide level. And then once it has received the subscriptions from the producers who are participating within the Work Order then it can operate within those producer firms. Then it is simply a matter of aggregating costs and distributing them based on a working interest distribution that will be unique unto itself. That is the first phase of the Work Order. The second phase is that it controls the costs and efforts of the producer firm and Joint Operating Committee in any operation that is undertaken. If you have an element of an AFE that you want to be completed by someone, set up a Work Order to have them collect their time and costs to. If you have an internal program that you want to control the costs on, set up a Work Order and collect the time and costs of the people who work on it. Everything that is done in an oil and gas producer should have a Work Order, and everyone should be charging their time to a Work Order. 

In terms of the value that the user community can bring to the innovative oil and gas producer, the decentralized production model is the best there is. With over $170 billion in opportunity costs for 2012 and 2013 it is the dominant justification to proceed with the development of the Preliminary Specification. The decentralized production model is simple in its implementation and requires little in terms of technical complexity to overcome. The difficulty is in the level of change that is implemented in the people’s lives that are disrupted as a result of the introduction of the model. As with any change there will be winners and losers and with the level of disruption it is reasonable to assume that there will be big winners and big losers. It is my assumption that I am speaking to the potential winners. In that they can form the requisite organizations that can become the users and service providers that form the sub-industry that we will come to know as a result of the decentralized production model. 

What the decentralized production model does is take the prototypical producer and reduces them to the C class executives, the earth science and engineering resources, the land, legal and support staff with the remainder of the resources moved to service providers that will be focused on a process, or part of a process. They will use the entire oil and gas industry as their client base for the one process that they manage. And they will bill the Joint Operating Committees for the services that they render. So that when a production accounting service provider located in an area where production was shut-in for the month doesn’t send a bill to the Joint Operating Committee. They will not be the only ones. As all the service providers for that area will have incurred no services for those properties and as a result have not charged those Joint Operating Committees for any of the administrative or accounting charges that they would normally charge during months of production. Therefore the Joint Operating Committee reports a null operation where only the costs of capital are uncovered. The operating costs, administrative, overhead and accounting costs are not incurred and as such the reserves are left for a time when they can be produced profitably, the commodity is removed from the marketplace and effectively places a floor on the commodities pricing and the producer doesn’t lose any money on their operations. 

This requires that the service providers will have accounting and administrative process management capabilities that are consistent with the producer needs. Therefore they are part of the Preliminary Specification and indeed are using People, Ideas & Objects software to manage those processes. The User Budget allocation for the Service Providers is $83 - 166 or 250 to 500 man years of effort. These budget dollars will be implemented under the coordination of the user group that is participating in the Partnership Accounting and Accounting Voucher modules. 

With little budget help from any of the other user groups. And little to no help from Oracle Fusion Applications. However, Oracle Fusion Middleware makes this next project doable. The Material Balance Report is reliant on the User Budget that begins and ends here. The Material Balance Report is something that should have been undertaken by industry years ago. The scope is however beyond what can be tackled by a single producer, even Exxonmobil. Since we are aggregating the resources of the industry we will be able to approach a technically complex problem such as the Material Balance Report. Tracking the source and disposition of product from its origin to its point of sale in an unimpeachable manner is a necessary requirement for the innovative and profitable oil and gas producer. It is the foundation of which they we build, which is also part of the budget requirements here, the processes that depend on that volumetric reporting. 

One of the broader things that is happening here may not be too evident at this point in the discussion of the implementation. And that is the impact on the producer firm in terms of their staffs capabilities and requirements in use of the People, Ideas & Objects software. How will they be trained in the use of the software. How will the software be implemented in the producer firm. These are the traditional issues that cause the kind of complexity that we are talking about to fall apart. What works in the lab in the hands of the developers can fall apart immediately in the hands of the actual users. Its important to remember that People, Ideas & Objects are cloud computing provided software services. All of the software will be available anywhere on any device. And that the service providers will be the ones that are “replacing” the usual “in-house” accounting, administrative and overhead personnel. It won’t be the individual producers focus or responsibility to acquire the capabilities to understand or operate the software. It is the service providers who are focused on the individual process or subprocess that will be providing the capability to potentially Exxonmobil or the startup oil and gas firm. The administrative or accounting capability exists irrespective of the level of need within the producer firm or Joint Operating Committee. And that level of capability is state of the art in terms of the software, driven by the user community who may be active participants in the service providers. All operating as a sub-industry of the oil and gas industry. 

Accounting Voucher

The Accounting Voucher, like the Partnership Accounting module introduces some new concepts as a result of using the Joint Operating Committee as the key organizational construct of the innovative and profitable oil and gas producer. Key among those concepts is that an Accounting Voucher is open to the participants in the Joint Operating Committee during the time the voucher is open in the system. This is as a result of the pooling concept that is introduced in the Preliminary Specification. It is as a result of these new concepts and the fact that the Accounting Voucher is such a critical accounting module that I have assigned a $12 - 24 million or 36 to 72 man years of effort to it. There will be some crossover, or joint development efforts with user groups in the Compliance (Tax, Royalty, SEC), Service Provider, Service Industry, Accounting Firm, Engineering and Earth Science groups. There is also some joint development work on the Material Balance Report with the Partnership Accounting module and various odds and ends here and there.  

If we look at the service providers as a group we need to understand that their revenues are the current oil and gas firms General & Administrative costs. And will continue to be the oil and gas producers G&A costs. And not the net G&A costs that are reported on the Financial Statements in annual reports. It will be the Gross G&A costs that are incurred by the firms. Some of these costs are capitalized, some are offset by revenues and the net that are reported can be as low as 25% of what is actually incurred by the firm. It is the Gross G&A costs that will be the service providers revenue stream. 

Management of the various processes that make up the administrative tasks in oil and gas will be how the service providers earn those Gross G&A revenues. How they manage those processes will be primarily through automation presented through the Accounting Voucher. In the way that the Material Balance Report is able to encapsulate the reporting entity of a facility within a voucher for material, system and partner balancing. Or it could be used to capture the royalty process for a producers interest within a Joint Operating Committee. The ability to structure an Accounting Voucher for re-use, and build the capabilities of the voucher over time, as the asset matures is one of the features. The Accounting Voucher is a base tool for process automation. It will be used by the service providers to manage the capital, operating and administrative costs of the innovative and profitable oil and gas producer. 

Where are we going in the future of the administration of oil and gas. Are we to spend the next century huddled in the backroom processing transactions ever faster than the year before? Our ability to continually automate the processes that are involved in oil and gas will be necessary. That is handled by the Accounting Voucher in the previous discussion. And secondly we need to be involved in designing transactions for their efficiency. Or the best description of what designing transactions means is “coordinating markets.” 

To better understand the role of the service provider in designing transactions we turn to the ways in which we build value for the innovative and profitable oil and gas producer. Through the decentralized production model we can affect change in the commodity marketplace and create the ability to seize the opportunity costs that total $170 billion for 2012 and 2013. Secondly, with the alignment of the compliance and governance framework to the legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the Joint Operating Committee we gain a speed, innovativeness, accountability and profitability in the producer firm. And third, through a specialization and division of labor that is above and beyond what is possible through the current bureaucracy, we are able to achieve a greater throughput of economic output from the same resource base. It is this last point of our value accretion that is the role of the service provider in designing transactions. By defining and implementing constantly higher levels of specialization and division of labor through coordination of the markets, or transaction design, you will affect a greater economic output from the same resource base. 

These are the concepts that will be implemented in the Accounting Voucher by the user community. The process automation tools are more tangible than the latter in most people’s minds. Most will be surprised at the extent of the work done in the area of transaction design. These tools will add significant value to the producer and Joint Operating Committee in any field operation that is undertaken. 

Research & Capabilities

We move on to the implementation of the Research & Capabilities module. I have allocated a User Budget for this category of $7 - 14 million or 21 to 42 man years of effort. The Research & Capabilities module shares many characteristics with the Knowledge & Learning module however I have considered these in the allocations of their budgets and as a result there is no real crossover in terms of any opportunities for pooling of funds. That is to say that pooling of the budgets is expected and any savings that might have occurred have been reallocated to other areas. There will be some synergies however with the Service Industry, Earth Science and Engineering user group budgets to help defer some of the costs of the developments here. 

One of the key objectives of the Research & Capabilities and Knowledge & Learning modules is to move the knowledge to where the decision rights are held. The operational decision rights are held with the Joint Operating Committee and the knowledge is held within the producer firm. We therefore have to move the knowledge to the Joint Operating Committee. This reverses the flow that is currently in place as the industry is moving the operational decision rights to where the knowledge is held. This current practice is in conflict with the culture of the industry and leads to a variety of issues that are inconsistent with the needs of an innovative and profitable oil and gas producer. 

The actual process of capturing the capabilities and populating them within the various Joint Operating Committees seems to be rather simple when it is first introduced. However, it becomes incredibly complex when the proprietary nature of the capabilities contained within the module, and their security, are taken into account. This contrasts with the need to have the right information to the right people at the right time in order for it to have value. And that precision in the informations deployment is what we are seeking to attain in these modules. 

If an engineer updates a capability within the Research & Capabilities module that is specific to their proprietary knowledge about fracing. And they know that the capability provides value to the firm when it is used. It is imperative that that capability is populated to the pertinent Joint Operating Committees that they are participating in that have a demand for that fracing capability. That it is released to those Joint Operating Committees and to only those Joint Operating Committees. Understanding also that there are partners within those Joint Operating Committees who will have access to those capabilities and will be able to vote to deploy those capabilities for that property. 

This does not lead to any proprietary leakage of capabilities to the partnership. The capabilities that are developed within the firm are proprietary to the firm and are for its exclusive domain. Others can attempt to copy the capability from your firm however they will find that it is as costly and as difficult as it would be to develop the capability on their own. Capabilities are not transferable from one firm to another on the basis of copying. If you watch a surgeon conduct open heart surgery, or read his procedure, does that make you a heart surgeon? Having the knowledge within the Joint Operating Committee that one of your partners is capable of conducting extensive multilateral fracing, and the ability to review that capability through the Knowledge & Learning module opens up the “opportunity” to expand the horizon of what is possible. 

In the hands of the user community we can achieve the precision that this module demands. Maintain the security and proprietary nature of the capabilities of the producer firm. Yet expose these capabilities to the properties that it owns to let it fully understand and appreciate what is possible and probable. And that is just one aspect of the module. There is also the research area where there are a variety of interfaces that lead to the further development of capabilities in the innovative and profitable oil and gas producer. 

Knowledge & Learning

The Knowledge & Learning module picks up from the Research & Capabilities module and continues with the objective of getting the right information to the right people at the right time. I have assigned a User Budget allocation of $5 - 10 million or 15 to 30 man years of effort to the module. As with the Research & Capabilities module, pooling of some of the User Budgets with the Service Industry, Service Providers, Engineering and Earth Science allocations will help to offset some of the requirements of the module. 

In addition to the ability to move the knowledge to where the operational decision rights reside. The Knowledge & Learning module provides the ability to focus the users on the capabilities that are pertinent to the property held by the Joint Operating Committee. Only those capabilities from the Research & Capabilities module that are pertinent to the Joint Operating Committee are being published. And that relates to each of the producer firms that are participants in the Joint Operating Committee. Therefore the user will be provided with a focused view of the capabilities that are available from all of the participating producers. And will be able to choose based on which capabilities provide the best opportunity for innovativeness and profitability. 

This interdependency between the producers is necessary as the Preliminary Specification implements the pooling concept. Where the earth science and engineering resources of the producers are specialized and the division of labor between the producers is relied upon. Therefore the ability to pool the technical capabilities of disparate producers to cover off all of the needed capabilities of the operation are a given in these modules. 

The user community involved in both the Research & Capabilities and Knowledge & Learning modules will be heavily populated with earth science and engineering resources. This is to be expected as this is predominantly a module that they will use. It is however a module that will rely heavily on the ERP elements as well. As when they are working within a Joint Operating Committee and find a capability that meets their needs we want to be able to provide them with the full suite of ERP capabilities at that point. That is to have them raise an AFE, or Work Order, or process some payment, issue a Purchase Order or some other commercial operation that is the generic capabilities of an ERP system such as People, Ideas & Objects. To have these capabilities invoked with a simple right click of the mouse and then have a reasonably populated AFE form appear to invoke the capability within the property.

There are certainly more to these two modules than what has been discussed here in the past two days. I think however that the user community, with the budgets that are established here, can develop these modules into the components that make the producer and Joint Operating Committee the innovative and profitable entities that they should be. It is capabilities that are the defining act that make the oil and gas industry what it is. It is not supply chains or cross docks as in other industries. It is the capabilities development and deployment that make or break the oil and gas entities. It is fully one half of the producers competitive advantage and these reside in the difficult science of geology and geophysics and the applied science of engineering. Making oil and gas one of the most technically demanding of all industries. It is here, I think, that the user community can make such a difference in the future of the oil and gas producer. To underestimate the potential value and significance of these two modules is easy. Lets make sure that doesn’t happen. 

Performance Evaluation and Analytics & Statistics

Working on the Performance Evaluation and Analytics & Statistics modules the user communities will have User Budget allocations of $3 - 6 million or 9 to 18 man years of time for each module. These will be stand alone budgets as there is little crossover in terms of the budgets with other user groups. There will however be some resources that are available from the Oracle Fusion Applications and Oracle Fusion Middleware areas that are of substantial value. Oracle and People, Ideas & Objects have similar thoughts on the future of these types of tools and that is why we have allocated what initially appears to be a high budget amount to these modules. 

If I had to pick one element of these modules that will provide the greatest level of difficulty. And at the same time creates the greatest value for the end user community. It would be the collaborative nature of these tools that need to be developed into both modules. Having stand alone tools is one thing, having them operate in a collaborative environment brings them to a new level. 

A little off topic but pertinent to the user community is the sources of revenue that the user community will have when these application modules have been built. Once the User Budget allocations have been expended, to a large extent they will not be recurring on such a scale. These budgets that we are discussing here are over the course of our initial development and during the multiple years that we are in development before the first commercial release of the software. There will however be additional budgets for further development after that. The continuous improvement of the software at the direction of the user community is a priority of People, Ideas & Objects. It is reasonable to assume that the scope and scale of the involvement of the user community will not be as large as what is described in these budgets, however it will be significant. 

There is also the fact that the user community will be comprised of other groups. With the largest being the Service Providers that will be forming as a result of the decentralized production model that is used in the Preliminary Specification. It is important to recall that the revenues of the Service Providers are not as a result of the budgets that we are discussing here but are the current G&A costs of the producer firms. As the resources that are focused on the administrative and accounting tasks of the producer are moved from the producers themselves to the Service Providers, the G&A that is currently paid to these people will become the revenues of the Service Providers. Making the Service Providers as a sub-industry substantial in its size with revenues in the tens of billions of dollars. 

It is these initial User Budget allocations that will lead to how the development of the Service Provider sub-industry is developed, structured and operated. It will be these members of the user community who may move on to become Service Providers that define what it is that they need in the People, Ideas & Objects software to make the producers the most innovative and profitable. 

Compliance & Governance

We get to the final module of the Joint Operating Committee User Budget category. The Compliance & Governance module is able to rely heavily on other budget allocations for the pooling of resources. First there is the extensive work that is done in Oracle Fusion Applications. Next there is significant, and I mean significant pooling of budget dollars that needs to be done between the Accounting Firms and Compliance (Tax, Royalty, SEC) budget categories. The Accounting Firms have a budget allocation of $56 - 113 million or 170 to 340 man years of effort. A significant budget that we will discuss later. What they have is a significant task. And that is that they sign off on the integrity of the compliance and governance systems on behalf of the oil and gas industry. The Compliance (Tax, Royalty, SEC) have a budget allocation of $40 to 80 million or 120 to 240 man years of effort. These are on top of the budget allocation for the Compliance & Governance module of $4 - 8 million or 12 to 24 man years of effort. It is clear that the role of the user community in this module is one of coordination.

It may appear that these numbers are skewed toward the accounting firms and away from the focus of the producers themselves. And I would agree that it appears that way. It should also be remembered that the legislation that defines the regulations for taxes, royalties and SEC requirements have developed frameworks that are robust and include XBRL syntaxes and other technical frameworks already developed for the user community to adopt. The task isn’t so much defining what it is the compliance and governance requirements are but integrating the Compliance & Governance module within the Preliminary Specification in an integrated and innovative manner. And it is in this latter point that we have good news in that the development budgets will closely map what the user budgets are. Therefore the developers will have close to $100 to 200 million and 300 to 600 man years in development time to dedicate to these areas. 

When we look at the scope and scale of the undertaking of what is being done in the Compliance & Governance module, and the global scope of the budgets that are available. Then with the type of resources that are available to us, particularly the Oracle Fusion Applications and the work done by the regulators, I think that what is set out here is reasonable in terms of what needs to occur. The objective has to remain however, that we look to integrate these compliance and governance requirements in a manner that they are not second nature to the other modules of the Preliminary Specification. They must be integrated and an inherent part of the product. 

With that we come to the end of the allocation of the Joint Operating Committee User Budget category. It is with these resources that we have covered off the requirements of the producer firm and Joint Operating Committee. What appears to be a large project when you speak in terms of $2 to 4 billion in total. Begins to come into focus in terms of how those dollars will be spent and the tasks that need to be completed. There is much to be done. I have only highlighted the key points here in our initial discussion. We will go into greater detail in the future. 

The point should also be clear that there are significant business opportunities for those within the oil and gas industry. The Preliminary Specification materially affects everyone in the industry. This level of change means there are business opportunities that start with participation as a user in the developments of the Preliminary Specification. And then maybe moving on to the development of your own service provider firm offering the management of a process for the innovative and profitable oil and gas producers. 

Compliance (Tax, Royalty, SEC)

The next allocation is the Compliance (Tax, Royalty, SEC) user budget category and we have allocated $40 - 80 million in total for this section of user community involvement. The objective of this section in terms of output is to ensure that the systems that we build are in compliance to the various regulations that the producers and Joint Operating Committees are required to comply with. Of particular concern are the various royalty regimes that are in place in the various jurisdictions the producers produce from. It is our competitive advantage that we provide the oil and gas producers with the most profitable means of oil and gas operations. With royalties being the largest cost component of an oil and gas operation it would be incumbent upon us that we ensure that the producers and Joint Operating Committees pay the lowest possible royalties. And that should be one of our objectives, to ensure that the royalties are calculated in the manner that provides the lowest possible royalty to the producer organization. 

A large part of the costs incurred in this budget category will be for the royalty component. There will be many that feel that the various governments and administrations that collect the royalties should provide us some relief of those costs to help in dealing with these high development costs. To accept this money would be a betrayal of our interest to the producers we represent. We are financed by the producers and provide them with the most profitable means of oil and gas operations. If we accept money from the royalty regimes then we have compromised ourselves and cannot guarantee that we are working in the best interests of the producers. I would extend this conflict of interest to the user community and the service providers at large. We have a duty to the producers to maintain our competitive advantages and there are those situations that could potentially put us in a conflict of interest. Please be aware of this and avoid them at all costs, if you find yourself in one you should deal with it immediately. 

To deal with the tax, royalty and SEC requirements in the North American marketplace will require more than the resources that have been allocated here. And there have been. In almost all cases the royalty regimes have established high levels of technical frameworks and regulations that can be implemented quite easily. The hard work in many instances has already been done. In terms of the SEC and tax the same situation applies. The XBRL syntax is used by the SEC for its reporting purposes and it has been adopted throughout the Oracle Fusion Applications that are a base of our application. What we need to do as developers, users and service providers is the work that is unique to oil and gas, and unique to People, Ideas & Objects Preliminary Specification. 

Specifically that involves integrating these technology frameworks within the DNA of the application. So that they are an inherent part of the application, not an add on that is used later. The service providers will be providing the services of the actual process management on behalf of the industry. It will be you who will be actually using the applications and we need to define what it is to ensure that your management of the process is the most efficient and effective for the producer firms that are your clients. If you are managing the eligible capital costs for gas cost allowance for the Texas Railroad Commission. What is it that you want and need in order to manage that process on behalf of all of the Texas based producers. Or if you're managing a duplicate payment verification process for the entire North American based producer population, what is it that you need and want?

As we indicated during the Joint Operating Committee user budget category discussion there would be synergies between the budgets allocated here and elsewhere. The Joint Operating Committee user budget category for the Compliance & Governance module has an allocation of its own budget dollars. There is a separate budget allocation to the Accounting Firms totalling 17% of the user budgets. These are to provide for the Accounting Firms to sign off on the compliance and governance elements of the People, Ideas & Objects applications integrity on behalf of their industry. And there are significant resources in the Oracle section of the budget to determine what it is they have done in this category of their applications. Therefore with these resources I feel these tasks can be undertaken by the user community and service providers and provide the producers with the most profitable means of oil and gas operations. 

Service Industry

Within the Preliminary Specification the oil and gas producer has an enhanced reliance on the service industry. It is this enhanced role that has led us to designate a $40 to $80 million user budget category for the user community. These funds will be used in combination with the resources that are designated for the Resource Marketplace, Research & Capabilities, Knowledge & Learning and Security & Access Control modules that we discussed in the Joint Operating Committee user budget category earlier this month. 

When we talk about the service industry we are talking about the organizations that provide the field services to the oil and gas producers and Joint Operating Committees. Specifically we are concerned with how they do their accounting, their billing, their contact information (Federated Identity) and the interaction of that business information with the producers and Joint Operating Committees. We want to provide the oil and gas producers with the most profitable means of oil and gas operations and that requires that the administration of their operation be as efficient as is possible. In order to achieve that efficiency the service industry that services the producers in the field must interact with the producer at high levels of technical efficiency. 

What I am suggesting here is not so much that we establish a technical framework in which the service industry will comply. Since we are a cloud computing environment. We provide the accounting and administrative software and service providers to the service industry in combination with the software and service providers that are provided to the oil and gas producers. It would be in that way that our software and service providers would handle the processes that saw high levels of oil and gas industry interaction with the service industry. That way the oil and gas industry would be able to account for its activity in the manner that it sees its interests best represented. The service industry would have their own accounting and administration systems which would then interface with the cloud computing services that we provide. And these would be reconciled by the service industry representatives. 

Throughout the Preliminary Specification we have highlighted the areas where the service industry is represented and the interactions they will have with the producers and Joint Operating Committees. And it is a much more involved relationship. The current situation between the two industries is unsustainable and inconsistent with what is required for a dynamic, innovative, proactive and profitable oil and gas producer. In all areas, from the creation and securing of Intellectual Property, to the participation in the Security & Access Controls Military Command & Control Metaphor. The need for the producer to operate their field operations with military precision requires that the service industry has the type of systems that we are considering here. And our service providers being active in providing those systems to the service industry. 

Service Providers

We now look at the user budget category that will be the area which we will see the greatest level of change in the industry. Seeing how the service providers don’t exist as of today, and the majority of the people that will be working for the service providers are currently working for the oil and gas producers, that is a significant amount of change and we have barely started. Employing the decentralized production model is critical to the dynamic, innovative, proactive and profitable oil and gas producers economic health. Critical to the decentralized production model is the establishment of the service providers and their ability to charge service fees for their work to the individual Joint Operating Committees. It is in that way that the producer becomes flexible in their production options. In a world where there are 200 years of natural gas reserves, production discipline based on profitability is the only solution, and that is provided to the producers through People, Ideas & Objects decentralized production model. 

The service providers will therefore have a User Budget Category allocation of 25% of the entire user budget. That totals $83 - 166 million or 250 to 500 man years of user effort. A significant undertaking in terms of budget, and a significant undertaking in terms of the scope and scale of the processes that are being moved from the producer firms to the service providers. In the Preliminary Specification many of the processes will originate and be managed in their entirety by the service providers. It will be the user community that determines which ones and how they should be structured. I would suggest that 90% of the accounting, 80% of the production, land and exploration administration processes will be moved to the service providers. With the prototypical producer being focused on their earth science and engineering capabilities, and land and asset bases as their competitive advantages. Having these service providers provide for the generic administration of these processes on a daily basis will be the most cost effective and profitable means of oil and gas operations. The more they rely on this structure, the more profitable they will be as the lower the overhead of the producer firm will be. I would see this as a means of competitive differentiation in how a producer operated their firm. The leaner that they could operate from an overhead point of view, the more attractive the producer would be to the investment community. 

As we have indicated the user community will be the people that determine the processes that will be managed by the service providers. Taking all of the processes that are currently necessary within the industry and determining the appropriate manner in which they should be managed. Using a variety of different tools, but most particularly specialization and the division of labor, they will be able to identify the optimal solution to the way a process should be managed in the industry. From there they will work with our developers and develop the software on the basis of the processes that they have designed. They will also work to develop the service providers and the configuration of what that sub-industry will be comprised of. It will be the user community participants that will have the inside edge in terms of who establishes these service provider firms. 

Let me point out once again that the revenue streams of the service providers will be the G&A expenditures that are currently being spent by the oil and gas producers today. These total in the range of $40 to 60 billion per year for the North American producer marketplace. The majority of these costs will be what are carved out and used to establish the service providers revenue base. The question becomes how does an individual position themselves to acquire the ability to manage a process in this new sub-industry?

To answer that question we go back to how the Intellectual Property for People, Ideas & Objects operates with respect to the user community. We use the IP of the Preliminary Specification to raise the funds from industry to develop the software. Included in that is the costs of the user community. These funds are to support the user community as this is not a volunteer effort, and secondly as a means in which we purchase the IP from each of the participants in the user community. You are paid for your IP contributions. Now, if someone, or a group of people were to have established a process that became the process that was managed within the People, Ideas & Objects Preliminary Specification. Then that individual or group would have been compensated for their efforts, and, they would have acquired specific skills and understanding regarding the management of that process. They would have value to People, Ideas & Objects in managing that process on behalf of industry. And we in turn would provide them with a service provider license that gives them monopoly rights to the management of that process in either Canada or the U.S. This would be provided through the exclusive access to that process in the People, Ideas & Objects software. There is no purpose in having multiple service providers focused on the same process. The service provider will be focused on providing the best service they can offer without the distraction of having their client base being attacked by new entrants to the marketplace. Whether someone would see that this is an investment opportunity or not is up to them. We are operating on the basis of our second year of a ten year plan. I think it is an interesting proposition in that those that invest heavily in the user community will be rewarded with a position in the service provider sub-industry. 

Clearly the establishment of the decentralized production model will be one of the most significant events that will happen in oil and gas industry. It will provide the oil and gas producers with the ability to achieve market rates for their natural gas and by-products. It will establish a sub-industry of service providers that are dedicated to the efficient and effective administration of the oil and gas industry at the Joint Operating Committee level. And make for a thriving sub-industry that can undertake the types of workload the industry needs in the areas of administration, accounting, process design, technology implementation and research. I see a significant infrastructure being built just to support the service providers that will enhance the service offerings to the Joint Operating Committees. This administrative and accounting capability, available on an industry wide basis, is what is needed for the 21st century oil and gas industry. 

In addition to the User Budget Category allocation that we discussed yesterday. We will have a variety of synergies with the Joint Operating Committee User Budget Category allocations that we discussed earlier. These allocations will help to define specifically what the processes the service providers need to provide. Additional synergies are available from both the Compliance (Tax, Royalty, SEC) and Service Industry User Budget Categories. 

It would be nice to have the industry hand these monies over in a timely manner and for this community to begin these developments. However that is not going to happen. We have to stick to our ten year plan and be prepared to implement them on that basis. The bureaucracy is hell bent on our failure. They want nothing of this initiative to exist. And they will do everything in their power to ensure that it doesn’t. Remember that there's strength in our numbers and we have the ability to state that we provide the oil and gas producer with the most profitable means of oil and gas operations. The bureaucracy is certainly in control today. However, the CEO’s and CFO’s are with us, but they can’t fight the bureaucracy either. If they tried to turn the ship, the ship would fight back and they would have a mutiny on their hands. Our appeal resonates with the investor class and they are more frustrated with the lack of performance than we are. We need to get the word out, which is our 2014 goal. This is so that the user community can begin to form and the investor class knows that there are alternatives in the marketplace. 

What I can do to make this happen is show you that there is money on the table. And there are significant budgets and revenue streams associated with the work we are doing. From the $170 billion in opportunity costs for 2012 and 2013 for the producers, $667 million in development costs for the user community and tens of billions of dollars to the service providers in terms of annual revenue streams. What exactly has the bureaucracy offered you lately? The structure that I am detailing here is going to appeal to the movers and shakers in the oil and gas industry and together we are going to revolutionize the way that it is run, managed and operated. One in which we are structured to solve the operational issues as they occur. That is exactly what the Preliminary Specification does. By using the Joint Operating Committee the producer is enabled to solve the operational concerns that they face. So issues such as low natural gas prices can be resolved through solutions like the decentralized production model. That is the value of this business model. And the fear we strike into the bureaucracy. The fear that people are actually solving problems and concerned for the performance of the oil and gas industry. 

Accounting Firms

This next User Budget Category is interesting in that we are achieving many different objectives with the establishment of this user budget category. What we have done is allocated 17% of the User Budget, or $56 to 112 million to the Professional Accounting Firms. This would total 168 to 336 man years of effort. These are the firms that are responsible for the annual audits of the oil and gas firms for compliance to the SEC and other regulations. 

The objective here is to have the accounting firms sign off on the People, Ideas & Objects systems in terms of their integrity on behalf of the oil and gas producers. This work is done in the normal course of an audit, however, with the establishment of People, Ideas & Objects there will be a sizeable burden that the producers will have to undertake in order to achieve this sign off. By inviting the accounting firms into the development process, and having the costs of the producers aggregated in the manner that we have, we can mitigate the total costs to the producers, achieve the sign off at an earlier time and achieve a compliant system in the process. 

Allocating this workload across the accounting firms that are present in the U.S. and Canadian regions will make it possible for them to acquire the talent necessary for these purposes. No one firm will be asked to deal with this exclusively as that would slow the development work down. The need for these people to keep pace with the developers and the user community would be their responsibility and obligation. Our responsibility would be to implement their recommendations and achieve the sign off. 

These funds have synergies with a variety of other pools of funds that are within other User Budget Categories. The Compliance & Governance module holds the coordination and application design roles over the compliance and governance of the producer and Joint Operating Committee in the Preliminary Specification. Its budget is somewhat small but we are looking at this as the overall check and balance of the Compliance & Governance module. Other funds are coming from the Compliance (Tax, Royalty, SEC) category which will be relying heavily on the work that has been done in the compliance areas of the SEC, royalties and tax regimes in publishing technical frameworks. Other miscellaneous resources have been allocated such as the development of royalties in the Partnership Accounting Module.

There are significant resources being allocated to compliance and governance in the Preliminary Specification. When you consider our application relies on Oracle Fusion Applications which have this area covered off well, we will provide the producer with an effective compliance and governance product. The service providers who will be providing the software and services to the producers will also be well versed in the ways that the application operates. This is due to the fact that they will be participants in the user community that are involved in these developments. Moving on after development to provide the software and services on the basis of the decentralized production model. 

It is one of the indirect advantages of approaching the compliance and governance and using the accounting firms to sign off in this manner. And I do not wish to sound too derogatory here. By having the accounting firms provide the compliance and governance sign off. They preclude themselves from participating in the user community in any other capacity. Which also precludes them from any participation in the service provider community. Theirs is a unique service which is not dependent on the type of firm that they are auditing. They believe that they can take their people and move them into other areas, such as the opportunity that the service providers reflect, and build value. And with their brand and marketing dollars overcome the common sense of some of the producers. I know different, and I don't want them servicing the People, Ideas & Objects software and I don't want them pushing out the user community from the opportunity that the service provider marketplace provides them. Having the accounting firms conflicted in this regard will keep the service provider marketplace open to those with the experience and skills, and investment in the user community, to service the oil and gas producers and Joint Operating Committees. 

Engineering & Earth Science

The second last User Budget Category is the Engineering & Earth Science User Budget Category. We have allocated $20 to 40 million, or 60 to 120 man years of user community effort to this area. There will be some overlap from the Research & Capabilities and Knowledge & Learning modules in terms of budget synergies. However, I don’t think there will be any other budgeted areas where there can be some joint development work undertaken. 

This is a unique area for an ERP system to consider and one that we pay appropriate attention to. Using the Joint Operating Committee brings about an operations focus for all that are involved. That is also reflected in the Research & Capabilities and Knowledge & Learning modules of the Preliminary Specification. This operations focus brings the earth sciences and engineering into focus in the business of the oil and gas producers. It is therefore necessary that we allocate an appropriate amount of our budget to the earth science and engineering areas to ensure that we have included all of the necessary elements that a producer and Joint Operating Committee will need. 

Our research produced the Research & Capabilities and Knowledge & Learning modules. They allow a producer to focus on the development and deployment of their scientific capabilities. And to conduct specific tasks such as moving the knowledge to where the decision rights are held. These elements arise more from the business side than they do from the science. I am not familiar with the science from the point of view of the processes that are used in the day to day use and development, outside of capabilities development and deployment. There are, I am certain, many things that I am unaware of that would build value in the People, Ideas & Objects application modules that engineers and geologists would immediately ask for. This budget is for the development of those items. 

We are also not recreating the engineering or geological applications that exist in the marketplace today. We are looking to manage the processes that are prevalent within an oil and gas producer that can be more effectively managed in a user driven application. Recall that we have reorganized an oil and gas producer through the decentralized production model. Where the producer is a highly focused unit consisting of the C class executives, the earth science and engineering resources, some land and legal, and support staff. With the remainder of the resources being relocated into service providers. The manner in which these earth science and engineering resources operate will therefore have changed materially as a result. Both production and exploration administration are located in service providers. Therefore the processes that the producers will rely upon will need to be redefined, redeveloped and the software built. 

For all intents and purposes the oil and gas producer has changed in material ways and we are unaware of how those affect the earth science and engineering resources of the producer firm. At the same time this area is fully one half of the critical competitive advantage of the producer. And we should be able to take this opportunity to move the processes of the producer firms and move them to a higher level of performance. These are the objectives of these User Budgets. 


We come to the final User Budget Category, that being Contingencies. We will incorporate an overall summary of the User Budget Category in this post as well. How quickly we have spent the $333 to 667 million that has been designated for the user community. 1,000 to 2,000 man years of effort is a sizeable effort, and I think this series shows what the user community can accomplish in terms of ERP systems in oil and gas. Building off of the vision of the Preliminary Specification and the Oracle Fusion Applications provide you with a good foundation that will enable you to achieve our objective of providing the oil and gas producers with the most profitable means of oil and gas operations.

The Contingency User Budget Category is set at 6% of the total funds, or $20 to 40 million, or 60 to 120 man years of effort. These funds can be used in any area where we have misallocated our resources and find the need for more. At 6% it is a small percentage of the total funds as I suspect that there may be some areas where there are funds that are left unspent. Those monies can be clawed back into this contingency fund and used to allocate to other areas where there are shortfalls. 

There has never been a software development initiative like People, Ideas & Objects. Basing our project in the user community is the only way in which I will proceed. The complexity of the oil and gas business does not make for the traditional ERP systems fit. It is like trying to stick a square peg in a round hole. The industry is too unique to be subject to a standard package of one size fits all industries. The need for the user community to define the processes that it uses, and have the developers build the software based on that user definition is the only way that the user will have what they need to do their jobs appropriately. 

What job, and what process have we left untouched in the Preliminary Specification. We are exercising wholesale changes everywhere and on everything in the industry, the service industry and creating the service provider sub-industry. The prototypical producer is changed and how people are engaged with them. It is this level of change that needs to be analyzed and designed by the user community with the resources in the User Budget Categories. It will be the users that determine the actual makeup and means of the industry when the People, Ideas & Objects Preliminary Specification goes live in the industry. And it will be the user community, who will also be represented in the service providers, who will be the ones that make the transition to this new vision, a lucrative and profitable career choice for themselves. 

If you see yourself in this new configuration, taking on a different role in the industry. One in which your skills, experience, education or leadership can be of value in the user community. Where you can see yourself as the proprietor of a service provider. Providing a unique process management to the entire oil and gas industry. Where your team uses the most advanced tools and thinking to provide your clients with the highest quality services. Then now is the time to prepare and begin the process of building that future for yourself. 

We have now started the second year of our ten year plan. A plan which sees the Preliminary Specification operational throughout the tenth year. Our objective for this year is to get the word out and get like minded people involved in this community. We are at the very beginning, but we also provide the oil and gas producer with the most profitable means of oil and gas operations. 


We now turn to the Oracle end of our budget. Oracle plays a critical part in the People, Ideas & Objects Preliminary Specification. Their Fusion Middleware and Fusion Applications are the foundation of the eleven module Preliminary Specification. We also use Oracle’s database, Java, hardware, services and solutions. One could suggest we are an Oracle shop. However with this level of commitment to these product categories we can secure Oracle’s commitment to provide the oil and gas producer with the most profitable means of oil and gas operations. 

Lets start off with something tangible. Hardware is used by People, Ideas & Objects to run the People, Ideas & Objects Preliminary Specification in a cloud computing configuration. Oracle engineers their hardware to run their database and Java technologies at far faster speeds than the competition. Evaluating Oracle on a cost / performance basis is a slam dunk. No one can currently come close to the types of performance that Oracle is able to attain with their hardware and database. This is one of the premier reasons that we have selected Oracle. This is the reason that they are the dominant database technology in the world and will stay that way as long as Larry Ellison remains the head of the firm. Larry Ellison is the Steve Jobs of the corporate world, and Oracle is the Apple. We have therefore budgeted $100 to 200 million in hardware for providing the Preliminary Specification to the oil and gas industry on a cloud computing configuration. This amount of computing power is augmented with additional processing power. With a share of the $25 to 50 million in the services budget being allocated for the use of the Oracle Cloud service for any of our peak computing demand requirements. 

The second budget allocation is $5 million for software. This number has no basis in its determination other than it is a best guess as to what the cost will be to acquire the software for the cloud configuration of Oracle Fusion Middleware and Oracle Fusion Applications. There are individual user licenses that are also budgeted and noted below, this is for the one time acquisition costs of the software for development purposes.

There are a number of services that are offered by Oracle that can be accessed through this budget. I mentioned the cloud computing services. There are also Database Administrators, tuning and related services that fall outside of the development domain. These are collected and provided in this budget allocation of $25 to 50 million. 

Then we come to the Oracle developers. It has been my experience that you can learn about Oracle technologies through experience, or you can hire their developers to implement that high level of knowledge for you. The ability to hire their developers provides you with the understanding of the technologies at a higher level. One that you would have eventually learned, at substantial cost. I choose the cheap way and have allocated a healthy budget for the inclusion of $150 to 350 million or 450 to 1050 man years of Oracle developers. Undertaking a large development such as People, Ideas & Objects Preliminary Specification and using Oracle Fusion based products demands that we extensively use Oracle developers. They are, in a very significant way, an insurance policy for the oil and gas industry in terms of the overall deliverability of the project. 

The last budgeted item is for user licenses during the development for the developers and the members of the user community. These user licenses are for development only. Additional charges will come into play for the runtime use of the application. And the user license charges at that time will be much larger as their will be large portions of the industry using the application, not just the user community and the developers. These licenses include the entire stack of database, Java, Oracle Fusion Middleware, Oracle Fusion Application licenses. These are budgeted at $3,700 per man year for a total of $9 to 18 million. 

Oracle brings a unique character to the Preliminary Specification. I am pleased to be providing People, Ideas & Objects applications on their technology. When we add the user community to this we become ever so stronger. We are building an application for the 21st century and now is the time to get involved.