Pooling establishes how Synallagi assembles the earth science & engineering capabilities required by each Joint Operating Committee. Participating producers contribute specialized people, knowledge, skills and experience, supplemented by capabilities acquired through the marketplace. The Joint Operating Committee directs their application to the property. This brings the relevant expertise to the point where operational decisions are made, responsibility is assigned and financial results are measured.
People, Ideas & Objects combines automation, specialization and the division of labor with Synallagi’s other Organizational Constructs to support a culture of preservation, performance and profitability. Pooling applies these principles to the development and deployment of producers’ earth science & engineering capabilities. It enables each producer to build a distinct competitive advantage while giving each Joint Operating Committee access to a broader range of expertise than any participating producer could reasonably maintain on its own.
The economic difficulty begins with the expectation that an individual producer must possess the full range of capabilities required to operate every property in its portfolio. As scientific understanding advances and technical disciplines become more specialized, maintaining that breadth becomes increasingly demanding. Different reservoirs, development stages and operating conditions require different combinations of knowledge, skills and experience. Retirements and the time required to develop professional competence add to the challenge. Expanding headcount alone cannot resolve the underlying problem of how those capabilities are organized and used. People, Ideas & Objects anticipates these challenges could ultimately jeopardize a producer’s capacity to sustain profitable operations.
Maintaining comprehensive internal capabilities also creates a utilization problem. A producer may retain a specialist for work that arises intermittently, while another property requires that expertise immediately. Across independently organized firms, idle capacity and unmet demand can coexist. The organizational boundary prevents available knowledge from reaching the activity where it could create the greatest value. Earth science & engineering professionals face artificial constraints on their ability to offer specialized technical skills throughout the broader commercial marketplace.
Within Synallagi’s organizational design, pooling replaces the operator designation as the basis for concentrating technical capabilities in a single producer. The Joint Operating Committee becomes the organization through which participating producers assemble, direct and account for the resources required by the property. Each producer develops the capabilities in which it can establish an advanced and distinctive competitive advantage and makes those capabilities available for authorized deployment. Operating responsibilities are assigned explicitly to the people and Joint Operating Committees undertaking the work.
For example, one producer may contribute specialized reservoir knowledge, another completion expertise and a third production optimization capabilities. Service providers supply additional technical and administrative services. The Joint Operating Committee combines these contributions according to the property’s requirements, with defined responsibilities, schedules and commercial terms. Its available capabilities therefore extend across its participating producers and the marketplace.
This arrangement allows specialization to deepen without requiring every producer to duplicate every advance. Producers concentrate investment on the knowledge, methods and experience that distinguish their businesses. Work that can be performed more effectively by specialized service providers moves into the marketplace, where those providers can develop their own capabilities and serve multiple customers. The division of labor extends throughout the organization of the work, allowing each participant to contribute where it can create the most value.
The Research & Capabilities and Knowledge & Learning modules support this development and deployment of expertise. They connect the capabilities a producer is building with the knowledge required to apply them and the opportunities available through its Joint Operating Committees. Through the Joint Operating Committee–Capabilities Deployment sub-module and the marketplace, requirements can be matched with qualified resources. Availability, scope, performance expectations and compensation become matters that can be identified and coordinated explicitly.
The sharing of non-rival costs provides a complementary economic foundation. Professor Paul Romer’s work distinguishes knowledge that can be used repeatedly from the scarce human effort required to develop and apply it. A documented method can inform work on several properties without being consumed by its first application. An engineer’s time, however, remains limited and must be scheduled and paid for. Pooling combines better utilization of specialized people with wider authorized use of the knowledge they develop. Romer, “Human Capital and Knowledge.”
Synallagi applies this distinction by providing the means to recover the costs of developing valuable knowledge across the activities that benefit from it. Producers retain incentives to invest in research, learning and innovation because the deployment of their capabilities has a commercial basis. Intellectual Property, confidentiality and authorized access are established through the terms of participation and supported by the Security & Access Control module. A Joint Operating Committee receives the information and capabilities required for its work within those defined rights.
Pooling also requires operational discipline. Industrial Command & Control establishes the chain of command for the temporary organization assembled by the Joint Operating Committee. Individuals may remain employed by different producers or service providers while working under the authority assigned to their roles in that operation. Decisions, instructions and responsibilities must be clear to everyone involved. The Joint Operating Committee must be able to determine who is accountable for an activity, what authority that person holds and how performance will be assessed.
Job Orders and Work Orders connect authorized activities with the people, time and resources assigned to them. Epistemes support the knowledge dimension of capabilities deployment, while Work Orders retain their role in assigning time and resources. Together, these mechanisms connect technical requirements, operational execution and the financial record. The contribution of a participating producer becomes identifiable work undertaken for a defined purpose.
The Partnership Accounting module captures the associated time, direct expenses and other authorized charges against the appropriate joint accounts. Costs are attributable to the activities and properties that incurred them, with a clear basis for allocation among the working interest owners. This gives the Joint Operating Committee visibility into the resources consumed and gives the contributing producer a means to recover the cost of supplying them. The resulting financial information supports the evaluation of both the work performed and the property’s profitability.
Deployment therefore establishes a second revenue stream for the producer, alongside the revenues earned from its petroleum production. This revenue stream is designed, at a minimum, to offset the full cost of building and maintaining its earth science & engineering capabilities. Commercial terms must support that objective while preserving accountability for the work and charges accepted by each Joint Operating Committee. The economic value comes from better technical outcomes, higher utilization and reduced duplication; the transactions provide the means to compensate those supplying the capabilities.
The producer consequently has two related means of realizing value from its scientific and engineering investments. It can improve the performance of its land & asset base through profitable reserve expansion, improved production deliverability and cost reductions. It can also earn revenue by deploying its specialized capabilities to the Joint Operating Committees in which it participates. Both reinforce the incentive to develop expertise that produces measurable commercial results. Production increases and technical achievements must contribute to profitability.
Making this arrangement work requires an Enterprise Resource Planning system that supports the organization being proposed. Capability identification, access rights, operational authority, scheduling, commitments, cost capture and settlement must operate together. A decision to deploy a specialist must carry through to the person’s assignment, access to the necessary information, execution of the work and recognition of the resulting charges. Synallagi provides the common software framework through which these relationships can be administered across organizational boundaries.
People, Ideas & Objects draws on Professor Anthony Giddens’ structuration theory and Professor Wanda Orlikowski’s work on technology and organizations. This research examines how people shape technology and how its use influences organizational practices and structures. Our application of that research is that the software supporting producers must be able to accommodate changes in how work is organized, authority is exercised and knowledge is deployed. Those changes must be reflected in the systems through which the industry conducts its business. Orlikowski, “The Duality of Technology.” Orlikowski and Robey, “Information Technology and the Structuring of Organizations.”
People, Ideas & Objects, our user community and their service providers will therefore maintain a permanent software development capability. As science, technology, commercial requirements and operating practices advance, Synallagi and our user communities service provider organizations must advance with them. Pooling gives North American oil & gas producers an organizational means to deepen their competitive advantages, bring those capabilities into productive use and recover the costs of sustaining them. Its continued development must remain directed toward the most profitable means of oil & gas operations.
People, Ideas & Objects use automation, specialization and division of labor to increase industry performance and productivity. These are joined with six other Organizational Constructs to form a culture of preservation, performance and profitability for North American oil & gas producers. We have applied this solution to the earth science & engineering disciplines to deal with the anticipated difficulties in accessing adequate numbers of these resources in the mid to long term. When using the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil & gas producer. We are moving this earth science & engineering knowledge to where operational decision rights reside to increase accountability for decisions made. Therefore we have eliminated the “operator” designation to introduce our pooling concept.
The capabilities to house “state of the art,” “just in time” earth science & engineering resources necessary to operate each property within one oil & gas firm are believed to be beyond what will be commercially viable in the very near future. This is a result of the further specialization of earth science & engineering skills needed by each individual and each producer firm within the industry. With the current market situation, due to retirements and the inadequate number of people entering the professions, producers' resource costs are expected to increase. Additionally an anticipated increase in throughput is necessary to meet energy independence demands. The known fact is that each barrel of oil or gas demands more earth science & engineering effort as we consume the “easy” reserves first. When specialization is required, if each producer firm maintained the full scope of their capabilities necessary to achieve “operator” status, they would no longer be commercially viable businesses due to this increased demand from specialization and their limited supply.
Specialization and the division of labor is the only proven solution to increase performance and productivity. Introducing multiples of what is currently available. Another Organizational Construct of the Preliminary Specification is Professor Paul Romer's concept of non-rival costs, or sharing, as a further enhancement to specialization and the division of labor. With the Preliminary Specifications pooling concept, each producer on the Joint Operating Committee should be able to contribute their advanced hyper-specialized capabilities to the Joint Operating Committee. The objective being to enable the Joint Operating Committee to draw from the much larger pool of Joint Operating Committee producers' capacities of engineers and earth scientists. Also, it is meant to draw from market offerings to obtain the necessary "operator" capabilities. Additionally, there is the need for the removal and offloading to the marketplace of the lower level technical work and its payroll burden from the producer firms. This is done by service providers that specialize and divide labor based on geology and engineering skills. Enabling producers to specialize in those highly specific areas of competitive advantage that provide real tangible value creation.
To increase their competitive advantage and earn a return on their investment, the producer firm invests in developing their capabilities. Under the pooling concept this implies market coordination by using the Research & Capabilities and Knowledge & Learning modules of the Preliminary Specification. They are the critical competitive differentiator in the industry under the Preliminary Specification. They are also how within People, Ideas & Objects ERP software the producer earns a return on their investment in their capabilities. Through expansion of their petroleum reserves, production deliverability or reducing their overall costs on a barrel of oil equivalent basis. This is done in a highly competitive, dynamic and innovative environment. The answer in the short term is to ensure that these critical resource costs are recovered from oil & gas exploration and production on a day-to-day basis. Time and direct charges are recovered from the joint accounts for all of their time and expenses. That is to say that the people (representing the producers capabilities) who are pooled into a Joint Operating Committee, have been assigned a role within the Industrial Command & Control, Job Order and Work Order systems of People, Ideas & Objects et al Preliminary Specification. Whose costs are captured in the Partnership Accounting module. Consequently, the deployment of the producer's capabilities will result in a second revenue stream. That offsets the cost of building and maintaining these earth science and engineering capabilities.
This pooling concept is the solution People, Ideas & Objects have developed to replace the current "Operator" designation. Producers' ability to have just-in-time capabilities for all properties requires an industry-wide surplus of unused and unusable earth science & engineering capabilities to fulfill this just-in-time requirement. This has led to individual producers hoarding these resources to meet their just-in-time needs, causing low utilization rates industry-wide. The ability to pool producers' highly specialized resources into the Joint Operating Committee releases these otherwise unused and unusable capabilities. Facilitating an increased level of specialization for producers. An innovative oil and gas industry requires specialized knowledge, skills, experience, and ideas from all producers. Therefore each of these producers must be able to charge and recover their costs for these resources through a joint account as necessary. A charge made to a company's operations or capital expenditures to earn a return on the specialized capabilities it has built.
A note here to say that this falls under the domain of an ERP (Enterprise Resource Planning) solution for the following reasons. People, Ideas & Objects highlighted Professors Anthony Giddens and Wanda Orlikowski's Structuration Theory and Model of Structuration. In summary these suggest that software defines and supports organizations and therefore constrains them. Without software to define what an organization is and what it does, it would not exist commercially in the North American oil & gas marketplace. Sealing the producer firm in the long term definition of the Preliminary Specification would be as inappropriate as today’s business issues arising from the unchanging ERP software environment that exists. Therefore, People, Ideas & Objects, our user community, and their service providers will develop a permanent software development capability. This is based on the needs of the dynamic, innovative, accountable and profitable oil & gas marketplace. Ensuring the Preliminary Specification and the services associated with it are kept up to date and serving the greater oil & gas economy.