Request For Proposal

Abstract

People, Ideas & Objects, our user community, their service provider organizations and Oracle Cloud ERP are based on providing the dynamic, innovative, accountable and profitable oil & gas producer with the most profitable means of oil & gas operations in North America. Our approach is business oriented to focus the industry on generating "real" profitability. This is to ensure society has abundant, affordable and reliable energy to fuel their economy. The most powerful economy known to man. Our value proposition is derived from hierarchy's disintermediation. To fully adopt and integrate the industry standard Joint Operating Committee, the legal, financial, operational decision making, cultural, communication, strategic and innovation framework of the industry. Sound economic principles such as specialization and the division of labor and Professor Paul Romer's "New Growth Theory" regarding non-rival goods have helped establish our Cloud Administration & Accounting for Oil & Gas capability. Eliminating the need for each individual producer to build the same non-competitive capabilities of administrative and accounting expertise on an unshared and unshareable basis. Implementation of our decentralized production model as part of our business model ensures "real" profitability is earned everywhere and always. There are many other attributes of our value proposition such as innovation that cannot readily be quantified and qualified. However, all of these are focused on generating value for all concerned. Where profitability in the primary industry of oil & gas is necessary to ensure that a healthy and prosperous oil & gas economy is maintained and sustained for the long term. 

There are no other financial resources to do so. Governments only spend money taxed on earnings and profits. In general, investors allocate their investments to the most profitable areas of the economy. Oil & gas producers participating in a primary industry must stand on their own and provide for themselves, the service industry and all the subsidiary industries dedicated exclusively to their success. Producers must provide value for their investors, bankers, employees and ensure a healthy and prosperous industry is handed down to others. Profits are the only means to sustain anyone and anything for the long term. To do so takes effort, skill, courage and perseverance. None of these attributes can be pointed to in the current officers and directors of the producers, who coincidentally hold all the authority and responsibility to ensure profitability and accountability are attained, and are the only group who've obtained any personal value from this industry for many decades. These are disconcerting and difficult words aimed directly at those who choose which ERP system to use. However, the destruction and damage they've caused is a fundamental betrayal to all those who have worked to build the industry constructively. Officers and directors have the authority and responsibility to make changes and avoid further catastrophe. We can achieve this by implementing People, Ideas & Objects, our user community, and the Cloud Administration & Accounting for Oil & Gas service, provided by our service providers.

To resolve the current difficulties that plague the North American oil & gas industry, we need to organize an approach to how it will be resolved. That is the work People, Ideas & Objects have completed in publishing the Preliminary Specification. Our approach follows the industry culture contained in the Joint Operating Committee and six other organizational constructs, the overall vision of the Preliminary Specification, our user communities vision which provides them with the authority and responsibility to implement a dynamic, innovative, accountable and profitable foundation. SAP implementations are designed to cater to a firm's internal policies. Industry culture is defined in the Preliminary Specifications by seven Organizational Constructs consisting of the Joint Operating Committee, Innovation, Markets, Professor Paul Romer's non-rival costs, Intellectual Property, Information Technology and Specialization & the Division of Labor. Markets establish an organizational construct on the basis of price.

This proposed oil & gas organizational structure will be the software product of People, Ideas & Objects Preliminary Specification. It will also include our user community and their service provider organizations. What we describe as a rebuild of the industry brick by brick and stick by stick. It's not our intention to destroy the industry. Unfortunately the officers and directors of the producer firms have already done so. Software defines and supports society today. Serendipity, spontaneous order, disintermediation and creative destruction have been hamstrung by software that constrains an organization in proverbial cement. This is based on its current process management definition. Any organizational or process change must be orchestrated through software first. Otherwise the organization quickly reverts back to the processes existing in the organization's software definition. This is the consequence of our dependence on Information Technology and is what we’ve called a modern-day software bug. One that has cost the industry its prosperity as officers and directors took this knowledge, never changed the organizations ERP software and therefore secured their methods of management and personal aggrandizement. 

Fast forward to 2023 and People, Ideas & Objects believes this same logic is used again. Oil & Gas investors demanded producers move to a Tier 1 ERP system to enhance profitability and accountability, of which we qualify with Oracle Cloud ERP. Will producer officers and directors use this logic to select SAP with their vision of clean energy and a pliable "blind sleepwalking agents of whomever will feed them" approach to marketing to secure the sale? We believe this would harm People, Ideas & Objects by eliminating the Preliminary Specification as an active software offering for at least a generation. SAP would have to deliberately avoid our Intellectual Property and that would be considered a feature, not a bug by these officers and directors. Providing them with another viable scapegoat as to why they cannot provide the style of accountability or performance being asked of them. Lastly it would ensure the industry maintains the status quo strategy of "muddle along." It was in our May 2004 Preliminary Research Report that we stated “SAP is the Bureaucracy.” p. 33.

Regarding energy difficulties. I feel we do not have a handle on the situation and control is out of reach of these current organizations' officers and directors. Where we are is best explained in a Winston Churchill quote. 

Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.

Background

As pertinent background information, I began this adventure in 1991. I spent the first year promoting Oracle to join our development of client server systems for Canadian oil & gas companies. This initiative failed in February 1997 due to my firm's inability to secure oil & gas producers' commitment. Or in retrospect, I believe now that producers rejected the system due to the high level of accountability we introduced. Oracle subsequently tried Oracle Energy and found the same outcome, no participation from the producers for the same reasons, and left in 2000. In a similar transaction, IBM sold their oil & gas specific ERP system in 2004 - 2005 for the same lack of producer support. There is an inherent level of commitment evident in Oracle's near decade long actions regarding oil & gas ERP systems that is not evident in SAP’s. A 22 page white paper and three day conference are superficial in comparison to the Preliminary Specifications 400 thousand words, a viable business model and an active user community that began its development in 2014. Accountable ERP systems have been deliberately avoided for at least three decades of my involvement. Those who offer such products have not benefited due to their specific pursuit of enhanced producer performance, accountability and integrity.

Oracle’s market capitalization is now $314 billion and it is the premier ERP provider in the world according to Gartner. SAP’s is $156 billion. I do not recall SAP’s efforts to build an oil & gas solution like Oracle or IBM had. Together Oracle and People, Ideas & Objects can build the Cloud Administrative & Accounting for Oil & Gas to solve these critical issues in this industry. And do so by first avoiding the issue of these officers and directors of North American-based producer firms and their desire to maintain their systemic lack of accountability. 

Looking at the decision to purchase and implement an ERP system. It’s expensive, time-consuming, affects firm management and tightens compliance and governance. It holds officers and directors accountable for their actions and decisions. Accounting is about reporting performance. As I’ve documented throughout these writings, the oil & gas producer officers and directors have morphed their accounting to record value. They've chirped their “building balance sheets” and "putting cash in the ground" mantra. People, Ideas & Objects believe that capital intensive industry products contain high levels of capital costs within the product price. By implementing the Preliminary Specification, industry would adopt our methods. This would allow producers to perform, provide accountability and compete for capital on the North American capital markets. ERP decisions are made at the board of directors level based on officers' recommendations. Due to the high cost, time and disruption in producer firms that undertake ERP implementations, this level of organizational involvement is mandatory to make the decision. Once the decision is made it would not even be considered again for at least seven years and only if management were dissatisfied. 

I became aware of a specific request for a Tier 1 ERP implementation by investors a few years ago. I am unaware of how long it has been since it was requested. What we do know is that unlike the move to clean energy which was implemented the night the alleged investors allegedly asked. In what I’ve described was an unauthorized manner, we only recently saw what was predicted for SAP uptake. This is wholly consistent with the refusal to provide competitive investment performance through appropriate profitability for decades. On the one hand, they move into unrelated, uncompetitive industries with no performance record and massive government involvement to compensate for value generation. With no plans or strategy for how to turn clean energy into a success, officers and directors grant themselves the authority to proceed without shareholder approval. Producer officers and directors will be able to justify these actions with the simple viable scapegoat that they’re “saving the planet,” and the reason they’re not profitable is “they haven’t figured it out yet” for their continuing poor performance. Focusing on oil & gas and enhancing its performance doesn’t intrigue them for some reason. Less than 2 years ago, they abandoned shale as a "noncommercial" resource. It is always the officers and directors' primary and only choice to move on to the next "great thing." Not once in their history have they sought to rehabilitate an asset's performance to profitability. Alternatively enhancing the level of accountability of their actions by implementing the August 2012 publication of the Preliminary Specification, our user community and their service provider organizations is obviously never going to happen if SAP meets the Tier 1 ERP requirement demanded by their investors and selected by the producer officers and directors. 

In late 2022 and 2023 we saw many clean energy investments suddenly lose favor among the North American producer population. Realization of the damage they are doing to their own organizations' capabilities in earth science and engineering. And certainly after being destroyed by the producers themselves, the service industry cannot justify capital expenditures when oil & gas leadership saunters off the stage chasing the latest shiny “clean energy” object. In the normal business world this lack of performance would be disqualifying for continuation of the management. The level of destruction is truly epic. Moving off into unrelated industries unauthorized is definitely grounds for dismissal. And now they’re returning due to potentially losing their personal financial benefits in the form of oil & gas cash flow. This should mark the end of this leadership. That they've never understood why performance or accountability are issues. The purpose and need of the Preliminary Specification shows no redeeming value for the officer and director class in North American oil & gas. 

I’ll emphasize the year I started this was 1991, 1992 with Oracle. Both ours and their initiatives failed due to producers' inability to participate? Yes, that’s a question. The issue was not brought up by investors in 2020, or whenever they first requested ERP systems upgraded to Tier 1. This is a culture, a behavior and an infestation across the North American producer population of officers and directors. It is designed to maintain their enhanced personal financial compensation. Producer firms must implement the Preliminary Specification to wrest control from the hands of a small cadre of officers and directors that have found the source of their personal wealth is through a deliberate, destructive and dangerous level of unaccountability. One that has caused enormous risk in societies' ability to source profitable energy independence from secure, reliable and affordable oil & gas. This risk is likely to become permanent if they implement SAP’s ERP software.

I would like to discuss those ERP providers that have been in the market throughout this time and the stellar efforts they’ve done. Producers can avoid Tier 1 ERP providers and maintain their history as I’ve briefly described here. There are ERP providers that cater exclusively to oil & gas. ERP systems providers have been in business for years and decades. They too have experienced abuse by producer officers and directors who seek deceptive accountability. To suggest these ERP providers have been put on a shoestring diet would be unfair and more appropriate to describe it as a second hand shoestring diet. A common tactic was signing a service contract and never paying for the application. Never sponsored any changes to their systems. Producer officers and directors have the systems they want providing them with the obscurity they desire. Why would they change that? Ensuring that their accounting and ERP systems were always inadequate. And I say that with all due respect to my competitors who have done the impossible in the most hostile of business environments. And should they have provided the accountability necessary, they too would have joined People, Ideas & Objects on the outside looking in.

Let me suggest a hypothesis that builds upon our situation today. If oil & gas producers had the appropriate Tier 1 ERP providers in place for the past decades of this history, would the industry have fallen into the financial, operational and political crisis that we see the North American oil & gas industry experiencing today? Is it the lack of effective ERP systems, including SAP, that leads to inaccurate producer results? This has enabled the industry to fall into the disaster and destruction it currently is? I’ll reiterate that the lack of effective ERP systems is the deliberate and desired outcome of producers' officers and directors' actions over decades. Why would only People, Ideas & Objects submit specifications?

Producers should ask themselves. Will consumers demonstrate the same tolerance, patience and perseverance that both their oil & gas investors and People, Ideas & Objects have displayed these past years? Or will they want answers sooner and hold producers accountable for their energy demands and whatever else is on their minds? Will they demand more than “muddle through” as an answer, and who will they turn to to heat their homes and earn their living? Having a permanent, firmly established SAP-compliant, unaccountable organization is a greater concern for consumers than for oil & gas investors. Investors could always sell their interests. I would advise these officers and directors to rethink their approach and ask themselves, just because they can continue with their unaccountable ways, does that mean they should? No one questions oil & gas reserves due to shale formations. There is no doubt that oil & gas producers possess the capacity to spend investor money to increase deliverability. What’s different today is that investors aren’t volunteering for the “dupe” role anymore. And producers have never earned “real” profits. History may not repeat itself. Will there be oil & gas reserves everywhere, and not a drop to burn?

In writing this I fully understand the implications of doing so. Making this a failed RFP a self-fulfilling prophecy is not what I intended. This is my attempt to highlight the risks we may face by cementing the established bureaucracy for at least the seven years SAP will be present. Who will step up if People, Ideas & Objects fail in the market, yet the IP of the Preliminary Specification will need to be accounted for in any future solution? And even if someone felt they could provide a better solution, would they lead their product forward with enhanced performance and accountability? In the same way Oracle and People, Ideas & Objects were ostracized and vilified in the past?

I also want to clarify, it should not be misunderstood that I’m conceding the point. After 32 years, that’s not even on the table. What I am stating is that the stakes for all concerned will grow exponentially more difficult in what appears to me to be this next phase of our journey. More difficult for all those associated with People, Ideas & Objects but also for all those who depend upon North American producers in some form. We are heading to what appears to me to be a “quick decision" by producers to adopt SAP based on satisfying their investors' input, much like they adopted investors' clean energy demands. We should ask these producers if those phantom investors that demanded the transition to clean energy ponied up and actively supported these activities. Returning from the clean energy horizon is like slinking back with their tail between their legs. Although SAP meets the general requirements of a Tier 1 ERP system, it's a decision made in the immediate interest of officers and directors' continued, deliberate and destructive lack of profitability and accountability. As with so much of their activities, it’s specious. SAP will also be the least costly in the short term, however far more consequential to the industry's profitability, accountability and prosperity. To suggest that People, Ideas & Objects may benefit from the producer firms' decision is an argument that doesn’t comprehend the value destroyed by this deliberate bureaucratic sloth. It also doesn’t understand the relationship People, Ideas & Objects have with producer bureaucrats.

Our Value Proposition

What if ERP software in oil & gas was no longer seen as an overhead cost but as the business opportunity that People, Ideas & Objects suggest it is? Which is the perspective oil & gas producers need to adopt to move their organizations on a higher trajectory in terms of performance and accountability. There will be no further development of any organization in any industry without software, but particularly ERP software. This defines and supports an organization's structure, performance and changing capability. Otherwise we will continue to have the paradox in oil & gas where the status quo is satisfied with the status quo and therefore only the status quo will ever be offered. People, Ideas & Objects believe this is the source of the tragic cost we’re experiencing with much more damage soon to arrive. It’s not enough to own an oil & gas asset. Without access to ERP software in the form of the Preliminary Specification there is abundant evidence now that North American oil & gas assets will never be profitable. Regardless of the commodity price, producer officers and directors have shown no interest in anything else. The level of destruction they have caused is unprecedented in business history. We should note that this occurred while our Preliminary Specification, designed specifically to deal with the producers' issues, was offered to mitigate these damages. The faith, trust and goodwill built in prior generations has been destroyed and the industry remains in the hands of those who operate in such bad faith. Now that there’s money on the table in the form of higher commodity prices, and potentially detrimental energy shortfalls this winter, actions need to be taken by oil & gas investors to specify the selection of an acceptable tier 1 ERP provider such as the base of our offering, Oracle Cloud ERP. It should only be People, Ideas & Objects, our user community and their service providers operating as our Cloud Administration & Accounting for Oil & Gas.

In order to clarify their culpability, see the following chronology of recent officers' and directors' records. Each of these specific events is generally known and can be easily verified. 

Today we don’t know what business they're in? This is the quality and style of leadership responsible for our economies' energy supply? A responsibility they’re unwilling to recognize, much like their inability to comprehend the need to earn “real” profits these past four decades? Where will we go from here with “muddle through?”

With a sudden rush to implement SAP at the behest of their "shareholders' demands," it was during July 2023 that producers began parroting the thought that they needed to stop listening to their investors as it has always been "poor advice."

The reality to confront is the industry's dominant "muddle through" culture and strategy. This has helped producers “accept that we can transition to clean energy and discard conventional sources of coal, oil & gas.” Oil & Gas provides 10 to 25 thousand man hours of equivalent mechanical labor per barrel of oil. This amounts to 28 to 71 times the mechanical labor of the entire global population. If we have to ration or conserve this resource, as Mr. Van Beurden asserts, we make decisions about who may eat and work. The officers and directors did not feel obligated to do their job of providing oil & gas to the market, therefore that was the consumer's problem. 

We were also allegedly told we held 50 and 100 year supplies of oil & gas in shale formations available on the North American market a few years ago. This was prior to the unanimous declaration by Shell's former CEO Mr. Van Beurden that shale would never be commercial. In 2021, it was abandoned and sold to invest in clean energy. Now we hear there may only be 10 to 15 more years of usable, drillable shale locations in the U.S. How is this? Oil and gas producers have always focused on reserves. Oil & gas exists in oil & gas men and women's minds. Of which the industry's leadership, such as Mr. Van Beurden prefers chasing fairy tales in the land of perennial losses and the abhorrent accountability of clean energy. Oil & gas reserves depend on economic conditions. At a $5 oil price there’s no oil in the world. At $150, you get a 50-year supply, etc. Technical specifications as to the amount of oil in place are as useless as the estimated remaining usable life of a punch press from a manufacturer. The market will determine its value.

In terms of the value People, Ideas & Objects generate, our Revenue Model provides the lowest ERP system cost in the industry. And that is by charging for software development costs, plus a profit as our fee structure, across the North American producer population. These costs are distributed on a per barrel of oil equivalent production basis. Therefore the industry pays for the one-time costs of ERP software development. A fundamentally more efficient value proposition than any of our competitors that charge each producer individually. Our user community is implementing Cloud Administration & Accounting for Oil & Gas of our software and services of their service provider organizations. Realizing the remarkable cost savings and associated benefits of the cloud computing paradigm across the accounting and administrative domains of the industry. The substantial fixed costs associated with developing administrative and accounting capabilities and capacities within each and every producer organization are redundant, unshared and unshareable. High overhead costs are, we believe, the secondary reason for the chronic lack of “real” profitability in the industry. 

People, Ideas & Objects Cloud Administration and Accounting for Oil & Gas transforms these non-competitive attributes into variable overhead costs. Production that is not profitable can be shut-in to incur a null operation, no profit or loss. Consequently, overhead of the producer firms and Joint Operating Committees will only be incurred during times of profitable production. Using our Preliminary Specifications decentralized production models price maker strategy, all production will be profitable, everywhere and always. Therefore all overhead is recovered in current operations by passing these costs on to the consumers. A critical difference to today's method of operation where most overhead is capitalized and therefore the cash spent is recovered through depletion over subsequent decades. Leaving cash deficiencies for costs such as rent and administrative salaries etc to be replaced by the investors annual stock issuance!

We also provide value because we're not focused on traditional software company concerns like code and customers. Cloud Administration & Accounting for Oil & Gas is oriented and focused on the changing business of a dynamic, innovative, accountable and profitable oil & gas producer. It also includes their associated service industries. This highlights the different motivations of software developers over the long term. With People, Ideas & Objects we generate revenues based on changes and needs producers and others communicate through our user community. We are motivated by continuous software improvement. In the traditional software vendor’s case they are motivated by their code and customer base. The larger their code base, the harder it is to change, which does not produce revenue. And the larger the customer base the more costly any changes become for the software provider to implement across their user base. Coincidentally, these changes to customer software do not generate revenues. Hence, their age and size as a software firm paradoxically leads to increases in development costs and overhead burden. What we have is a contrast and conflict in the dynamic nature of the software itself. This is in terms of the cost to each oil & gas producer and the motivation behind the developer. In addition People, Ideas & Objects uses Oracle Cloud Infrastructure and specifically Oracle Cloud ERP, which is built on Java, the first object-based ERP system. Therefore People, Ideas & Objects will be the first object-based ERP system available in the North American oil & gas industry, providing additional cost benefits over traditional procedural programming languages when all future object developments are incremental to existing code.

It is in each of these areas that we set the foundation for the material value proposition we provide North American producers. We have valued this in the range of $25.7 to $45.7 trillion over the next 25 years. There are many aspects of our offering that are not qualifiable or quantifiable and they are detailed in the discussion below. Our quantified numbers show that operating the industry on the basis of profitability everywhere and always increases North American producers' earnings by $5.7 trillion. The remaining $20 to $40 trillion of our value proposition describes how much capital will be required over the next 25 years. This is an estimate based on what others have said. In the Preliminary Specifications method of recognizing and passing capital costs on to consumers. Overheads are recovered in the current month of operation. And other cash management techniques have been used to manage the business. Using the same investor dollars captured in property, plant and equipment repeatedly on a cycle that competes with North American capital markets expectations eliminates the need to demand $20 to $40 trillion in new capital from investors. There will be no further need to build balance sheets or put more cash in the ground.

We only include this otherwise redundant business number as part of our value proposition as there has not been any change in industry methods to recognize that a capital intensive industry demands that the consumer's product cost reflects its capital intensive nature. That has not been the case for decades. We've stated this change during the past decade when the Preliminary Specification was available. Investors subsidize consumers' energy use by paying for capital costs. The subsidy amount is reflected on producers' balance sheets in the property, plant and equipment account. Or as we call these costs, they are the unrecognized capital costs of past production. Officers and directors have relied on a steady stream of new investor cash each and every year for decades, declared they’re profitable in the most specious manner and left the assets on the balance sheet for the CEO to run down mainstreet and brag about how big they grew their balance sheet and how much “cash they put in the ground.” Only in oil & gas could one hear such arguments, however we were subjected to a chorus of this each quarter across North America. 

This overreporting of assets has an equal and commensurate effect on overreported profits. High profits attract investors to invest. Ultimately leading to overcapacity and overproduction of oil & gas commodities that are subject to price maker economic principles. This resulted in continued price decreases across these commodity markets intermixed with the occasional and all too frequent comprehensive collapse of commodity prices for the past four decades. The consequence is an industry with a substantial negative present value. It consumes value to fund its operations. Only People, Ideas & Objects et al have identified this issue. Prepared a software solution with the Preliminary Specifications in the form of our decentralized production model's price maker strategy.

Contrasting Visions

People, Ideas & Objects, our user community and their service provider organizations have painted a viable and profitable vision of how to rebuild the oil & gas economy in North America from the ashes of what remains. We see the destruction, and much of what will happen in the next few years and it is not something people expect. Producer firms are comprehensive failures of tragic proportions. Action is needed to proceed with this software development initiative. From whom, when and where our funding is sourced is not known to us. We only know the one significant criteria to succeed. Funding must come from the oil & gas industry itself. Otherwise, the industry won’t respect these developments, commit to them, and only look for alternatives when the opportunity arises. Only when they have some “skin in the game” can we begin to rebuild the greater oil & gas economy brick by brick, and stick by stick.

The Preliminary Specification is now more than a decade old. What if its existence was no longer available? Would producers pay dividends, stock repurchases or pay off bank debt? What if the threat of using the Preliminary Specification no longer existed in oil & gas? In September 2023 I will be 65 years of age. Producers' officers and directors may be close to making their ideal situation permanent. What they always wanted is just around the corner. Only People, Ideas & Objects, our user community and service provider organizations stand in their way. Producers have cash streaming in, unaccountable organizations that could overnight and at a whim be involved in a variety of different businesses. Accounting methods that have been accepted by all concerned in the industry for decades, including the CPA firms, and a culture of “muddle through.” It’s decision time as People, Ideas & Objects believe the producers are moving now to seal their legacy of unaccountability and non performance. Doing so in the selection process of SAP as their tier 1 ERP system. They publicly state that listening to their shareholders is a misguided policy. An attitude that may soon be entrenched.

On the other hand this issue needs to be weighed against far larger issues that are persistent and unaddressed in the industry. The first is the science basis of the business and the "muddle through” approach of dealing with the looming retirements and continued inadequate interest in the university faculties the industry depends upon. The Preliminary Specification addresses this in the only way possible through organizational performance increases due to specialization, the division of labor and Professor Paul Romer's non-rival cost or sharing principles. The most significant part of this issue is leadership itself. As much as we berate them here at People, Ideas & Objects they are critical resources. Their inability to deal with the business may be a precursor to their exit from the industry. My point in raising the age issue regarding People, Ideas & Objects, engineers and geologists and industry leadership. If these points are so protracted that if Humpty Dumpty did fall, all the King's horses and all the King's men...

Oil & gas producers' investors insist that they implement a tier 1 ERP system, such as Oracle Cloud ERP or SAP. The Preliminary Specification base is Oracle Cloud ERP and qualifies for this requirement. SAP is used by a few oil & gas producer organizations and they are currently offering their solution as we speak. SAP’s system is designed for manufacturing companies where the ability to organize first, second, and third tier industry product production, just-in-time is attainable. Major auto manufacturers use it as does any global manufacturing concern and SAP makes them their priority. SAP sells their product to oil & gas producers however does not have an oil & gas solution. On September 12, 2022 SAP hosted their 11th annual oil & gas conference in Houston, and virtually. They published a white paper reflecting what they’re selling in oil & gas. On page 6 we see they focus on “Paving the Way for Business Model Innovations” indicating to me they don’t have a plan. However we read on.

SAP’s white paper shows the focus on Information Technology to solve oil & gas issues. Touching on all the key talking points, yet we find no instance of “accountable, accountability or performance.” This white paper and their Houston conference reflect SAP’s marketing brilliance which has been stellar. It is a study of some of the most effective examples in business. What I see SAP doing here is publicly stating that they’re selling unaccountability to producer officers and directors who want to maintain their chronic lack of accountability. Maintaining and permanently securing a lack of accountability in the organization through ERP software cements their bureaucratic manner and method of operation for the long term. I'm predicting significant SAP sales increases once the September 2022 conference is over. 

Once SAP is implemented, producers will be defined by their officers and directors in whatever business they choose that day. They will be built upon the non-accountability framework that has worked so well for them personally. In terms of “what, how and why” SAP proposes to resolve the oil & gas issues and opportunities there is nothing in their white paper. Rather, it focuses heavily on environmentally-based clean energy transitions that are "safe, reliable, and sustainable". It continues with the unauthorized diversion of oil & gas revenues that oil & gas investors create with their investment in the oil & gas business. Profits will continue to be irrelevant, however this behavior will include distributions to investors as they'll know nothing could be done otherwise. What should also be stated is that without a defined plan in place, SAP’s system will need to define, design and architect their system. A process that took a decade for People, Ideas & Objects as it does for all appropriately built systems. SAP will instead adhere to the current officers' and directors' culture to implement quickly.

The focus on oil & gas at People, Ideas & Objects was unwavering, and they could see the clean energy initiative for what it was. An opportunity to be unaccountable for oil & gas investors' money spent in that direction. There is no opportunity for any of the clean energy initiatives to begin to carry the freight that oil & gas does on a daily basis and we discussed that at length in our July 4, 2019 white paper “Profitable, North American Energy Independence - Through the Commercialization of Shale.” Using the Manhattan Institute's Mark Mills to present the fact that the physics do not support a viable or commercial outcome of either wind, solar or battery technologies. Those who bought the tailor's new clothes through this energy transition are now aware of their purchases' shortcomings. Further pursuit in this direction by oil & gas producers only exposes their continued misuse and abuse of their power, authority and responsibility. After a year of this transition it is evident to me that the alleged investors' push and drive for clean energy was contrived for deceptive purposes.

The “New Energy Economy:” An Exercise in Magical Thinking. 

Some people may say that SAP will struggle to build a solution in an environment where Intellectual Property being commercialized by People, Ideas & Objects exists and must be avoided. That however will be a bureaucratic feature, and not a bug. The Preliminary Specification will become the excuse producers use to justify not enhancing performance accounting or accountability due to "existing IP that legally has to be avoided." This may become their latest, and greatest viable scapegoat of all time. 

When I published in May 2004, organizations were defined, supported and constrained by ERP software. Producers interpreted that as the point where no further developments would be done to any ERP system. Cementing their organizations in bureaucratic stasis. Enabling them to hold onto power for decades longer. Not looking at the need to establish the permanent software development capability of the Preliminary Specification to ensure continued organizational development. Therefore in 2023 the prospective avoidance of People, Ideas & Objects IP will be a further extension of this same logic that precludes producers from ever attaining any level of performance or accountability expected of them.

Organizational Constructs

Key to the Preliminary Specifications value proposition is its alignment to seven different Organizational Constructs that convey an understanding and common sense approach to how the Preliminary Specification operates. These Organizational Constructs consist of the Joint Operating Committee, encouraging and facilitating the expansion of Specialization and the Division of Labor. They also include Professor Paul Romer's non-rival costs, Intellectual Property, Innovation, Markets and Information Technology. Developers and users of the system will default to these constructs for process definitions, frameworks and methods. Therefore, they will be able to understand what should be done and the consequences of it. To enable all stakeholders in the greater oil & gas economy to focus on providing a dynamic, innovative, accountable and profitable producer.

Professor Richard Langlois believes business is in transition. What Adam Smith described as the “Invisible Hand” of the marketplace, Professor Alfred Chandler hypothesized the “visible hand of management” had replaced it in his 1977 book “The Visible Hand: The Managerial Revolution in American Business.” Professor Langlois wrote in his paper “The Vanishing Hand: The Changing Dynamics of Industrial Capitalism.” And features prominently in his June 2023 book “The Corporation and the Twentieth Century, The History of American Business Enterprise.” Within the paper and book of Professor Langlois is the discussion of market supporting institutions to enable the transition from managerial capitalism back to the dynamics of the marketplace. To suggest that this is a natural process that happens with no thought or influence is incorrect. These market-supporting institutions need to be in place for the transition to occur. These seven Organizational Constructs, and the seven frameworks of the Joint Operating Committee are market supporting institutions the Preliminary Specification has recognized and implemented in Cloud Administration & Accounting for Oil & Gas.

In a related matter, I would argue managerial capitalism has waned across the economy and is the primary reason why it has become susceptible to disintermediation. Professor Langlois writes in his book. 

For Chandler, the revolutionary change after 1840 was the newly abundant availability of coal as a powerful energy source. Coal made possible an unprecedented scale of production that slowly destroyed the small-scale market-based system and called forth the modern managerial enterprise. p. 3.

To which I would add, 10 to 25 thousand man hours of mechanical leverage in each barrel of oil equivalent have contributed substantially to economic performance. It is therefore reasonable to ask, what contribution above and beyond the value realized from the enhanced mechanization of our economy was achieved by management? Are they claiming that the innovative developments since 1840 in the use of these three sources of energy were a result of management efficiency? If that is the case, why has their performance ceased to generate that value? Would it therefore be valid to claim the Soviet Union's hyper managerial system should have been more productive than ours?

The Joint Operating Committee

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

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

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

The next point is related to the accountability issue and to other issues around resource restrictions in the earth science & engineering resource supply. Professor Richard N. Langlois was an extensive source of primary research we used throughout the Preliminary Specification. His research is in industrial and innovation economics. He raises what he calls the agency issue or rights assignment problem in his working paper “Modularity in Organization and Technology”

The question then becomes: why are capabilities sometimes organized within firms, sometimes decentralized in markets, and sometimes coordinated by a myriad contractual and ownership arrangements like joint ventures, franchisees, and networks? 

Explicitly echoing Hayek, Jensen and Meckling (1992, p.251) who point out that economic organization must solve two different kinds of problems: "the rights assignment problem (determining who should exercise a decision right) and the control or agency problem (how to ensure that self-interested decision agents exercise their rights in a way that contributes to the organizational objective)." There are basically two ways to ensure such a "collocation" of knowledge and decision making: "One is by moving the knowledge to those with the decision rights; the other is by moving the decision rights to those with the knowledge." (Jensen and Meckling 1992 p. 253). p. 27.

Oil & gas has a looming crisis in its ability to source the appropriate level of engineering and geological resources available to it. This is due to retirements, low numbers of graduates, each barrel of oil produced demands an increased level of science involved in its exploration and production. In addition, it demands high production throughput. People, Ideas & Objects therefore questioned whether each producer firm could continue to establish the full suite of their in-house earth science & engineering capabilities and capacities at the level necessary to meet all of their needs, just-in-time, on a go forward, commercial basis. This would be particularly difficult when the solution to the resource shortfall can only be resolved by a revised specialization and division of labor. All producers would be unable to commercially sustain the burden of a full suite of operator capacities and capabilities with such diverse scientific and engineering demands. This is after specialization and the division of labor. And therefore we concluded that the control or agency problem would need to be resolved on the basis of knowledge being transferred to where decision rights were held. It is specifically in the Research & Capabilities, Knowledge & Learning and Resource Marketplace, but also throughout all of the modules of the Preliminary Specification that we’ve moved the knowledge of each participating producer in a Joint Operating Committee into alignment with its operational decision rights. Where it is then possible to pool the available and specialized technical resources of the producer members of that Joint Operating Committee, or available in the specialized market.

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

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

To which we've suggested that “ideas” be added to that list. Professor Carliss Baldwin also notes that “knowledge begets capability and capabilities beget action.” 

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

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

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

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

In terms of alignment with the industry's legal framework. The Joint Operating Committee is the representative organization for the partnership between producer firms on oil & gas properties. It is the standard method by which industry operates and all agreements and understandings are based on the work done through these joint ventures. It is rare that a producer firm has a 100% interest in a property. The diversity of producers in these holdings is necessary to mitigate financial risk and regulatory requirements that require specific land holdings etc to drill and produce. Current accounting systems report on Joint Operating Committee activities however People, Ideas & Objects et al have expanded the accounting and administration of these organizations to the level of stand alone reporting entities. Producing detailed, actual, factual financial statements each month for each Joint Operating Committee. Including detailed actual overhead costs. As a result, we can evaluate the property's performance based on its actual cost. This is what North American capital markets expect. By ensuring that each Joint Operating Committee remains profitable by not overproducing or engaging in unprofitable production based on low commodity prices. 

It is through our user communities individually owned and independent service provider organizations that we enable many of the value-adding features of the Preliminary Specification. Service providers are the reorganization of producer administrative and accounting resources into process-focused organizations. Focusing on one process and managing it for the entire oil & gas industry. There may be one lease rental payment processor that ensures all lease rentals are paid on time. The lease rental is charged directly to the Joint Operating Committee in addition to the service provider fee. An ancillary benefit of this reorganization is that the process management conducted by the service providers is standardized and objective in nature. Objective in the sense that no one producer firm dominates the software development process definition. The objective of People, Ideas, & Objects is to identify through our user community and industry participation the full scope of processes management. 

The need to have standardized accounting is necessary from the point of view of having industry rely on the accuracy of these methods. Objectivity is achieved because producing data and handling distinct circumstances is counterproductive in view of global dependence on data and process methods. Consider the process of balancing production data across the month, across a gas plant processing 1 bcf per day. Consideration of the specific location elements, regulations and needs of the property and industry as standard and having them captured in the software is necessary for this reason. By following this strict interpretation, when a property is reported as not profitable using Cloud Administration & Accounting for Oil & Gas' standard and objective accounting, it will be clear that the property is not profitable. The producers in each of these Joint Operating Committees will understand it is in their financial interest to shut-in the property for the short term. They’ll know the property was assessed on the same basis, under the agreements in the Joint Operating Committee, as all the other oil & gas properties throughout the continent. They'll be satisfied with standard and objective accounting understanding. And be satisfied that the determination of profitability or loss was the same that was applied across the continent. Producers will understand the impact on their organizations' profitability of shutting-in unprofitable properties. Their influence on their innovative processes, determining and applying these standard and objective methods and governing themselves accordingly. To increase property performance and value by producing only profitable properties and by innovating within that framework and understanding.

Overhead in the form of service providers fees for administration and accounting services are charged directly to the Joint Operating Committee by each service provider. If a property has been shut-in then no data is produced and nothing flows through our task and transfer system to the service providers. No process management is conducted by them when properties are shut-in and hence no billings will be rendered to the Joint Operating Committee. There is no profit or loss associated with the property's operation. The Preliminary Specification makes all producer costs variable, based on profitable production. 

The benefits of doing business in this manner are substantial. 

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

Specialization & the Division of Labor

Since 1776 the only basis for increased value generation has been the expanded definition and use of specialization and the division of labor. Adam Smith proved in his research that by reorganizing a pin factory around specialization and the division of labor between individual workers, augmented through proficiency, automation and mechanical advantage, the factory output increased 240 fold. Today the opposite is true. Software and most particularly ERP software has sealed organizations to a definition that is unchangeable through any means other than changing the software’s process definition. This aids producers' status quo configuration when they don’t sponsor or initiate any change in ERP software. Instead, focus on engineering tasks such as cost cutting to generate business value. If we are to meet consumer energy demands in the 21st century it will be the result of an “all of the above” energy strategy. For the next several generations the largest component of energy makeup will be oil & gas. Therefore, dealing with these issues and opportunities demands that we increase the industry's throughput substantially in order to meet the increasing demands of the North American marketplace. 

It is therefore necessary to ensure that we proceed from this point forward with the defined capability and capacity to enhance the ERP software used in North American oil & gas. And to do so to facilitate an increased level of specialization and division of labor that is iterative and constantly evolving. People, Ideas & Objects provide for this and are configured specifically to ensure this. Our business model depends on change. We generate revenues from software development changes initiated by our user communities interactions with industry. Our user community will be available everywhere and always to work with our developers to make the changes they’ve identified while working in their service provider operations. These service providers will be configured to deliver the explicit knowledge captured in our software and the tacit knowledge provided by their services. Our user community members are therefore on the ground in the industry on a day to day basis in the administration and accounting of producer firms. They are the exclusive, licensed individuals authorized to change the software's Intellectual Property. Our developers know of no one else providing input. In other words, our user community members have the power necessary to ensure that the processes they manage ensure the most profitable means of oil & gas operations everywhere and always. Only our user community members own and operate service providers. If anyone in the industry wants to know who they need to resolve their issue, they only need to contact the relevant user community member. Who do they call today, or at SAP if our suspicions of the officers and directors' actions are correct and they're selecting their solution?

People, Ideas & Objects Preliminary Specification brings significant advantages to all producers. This is a solution that should be used by all producers in the North American industry. Whether that is Exxon or the producer firm that originated at breakfast. This also applies to any and all other types of secondary and tertiary industry firms involved in the greater oil & gas economy, no matter their size. While we provide advantages to junior and startup oil & gas producers, we put their organizations in a position to succeed and grow. They’ll have distinct competitive advantages over today's business model methods of organization. These are brought about through the reorganization of producer firms' administrative and accounting resources into our user communities service provider organizations. And the implementation of our Cloud Administration & Accounting for Oil & Gas service provided by them. 

The producer organizations that we define and support in the Preliminary Specification employs and deploys higher levels of specialization and division of labor. We feel the overhead costs of producers demand these be dealt with by making organizations more efficient through the application of advanced, and continually advancing, specialization and division of labor. We also turn their overhead costs from a fixed, producer based capacity and capability, into a variable, industry based capacity and capability, their variable behavior being decided upon a Joint Operating Committee's ability to produce profitable production. One of the reasons for the high overhead costs of each producer (up to 20% of revenues, not the 1 to 6% reported on financial statements) is that all of their capacities and capabilities are replicated within each producer firm in an unshared and unshareable form. Today these accounting and administrative capabilities and capacities are purpose built within each producer organization to meet the demands of the various stakeholders. They also meet tax and regulatory requirements. It is these high overhead costs that are the secondary cause of oil & gas profitability problems. Overhead costs do not constitute a producer's distinct competitive advantage.

Preliminary Specifications support a reallocation of the producers' administrative and accounting resources into individual service providers headed by members of our user community. Our user community and their service providers are independent businesses that specialize in one administrative or accounting process. They conduct that process on behalf of the entire industry as their client base. If a Joint Operating Committee produced that month, under our decentralized production model price maker strategy, we can reasonably assume it is profitable. Upon production the processes administered by each service provider will be invoked through our task and transfer network. The processes undertaken and their associated billings will be charged directly to their Joint Operating Committees. If it’s not profitable, the property would be shut-in and none of the service providers would receive any data from our task and transfer network. Therefore, no processes will be conducted and no service provider billings will be rendered. The shut-in property does not incur a profit or loss, but is a null operation. Under either scenario, overhead costs will be covered in the current period through profitable operations or by the fact that costs will be variable under the Preliminary Specification. Meaning they won't be incurred when a property is shut-in.

Producers can benefit from beginning operations in this manner. First they will reach their optimum profitability when losses stop diluting profitable properties. Whether that is at 25% or 100% of the producer's capacity. When all costs are variable, production will be profitable at any volume of their production profile. This will preserve their oil & gas reserves for a time when they can be produced profitably. Those reserves will no longer have to carry the incremental costs of losses otherwise incurred if they continued to produce unprofitably. Keeping the commodity as reserves can be seen as an affordable means of storage where the subsequent costs of production and storage are zero. Commodity markets will find their marginal price when unprofitable production is removed from the marketplace. Increasing the value of all producers' production by realizing marginal prices across their production profiles. Producer officers and directors assert this is collusion. If making independent business decisions based on detailed actual, factual, standard and objective accounting information that determines profitability is collusion, it is no wonder producers are incapable of profitability? 

During 2017 officers and directors realized their collusion claims were moot; they stated unequivocally that they could never shut-in any production, it would cause the formation to “fold over on itself” or other specious arguments. That is until they ran the oil price down to negative $40 in April 2020. The refineries had to tell them they wouldn’t take anymore, forcing production to be shut-in. After resumption of over 25% of global shut-in production, formations showed no damage. These are just some of the many reasons for the Preliminary Specification implementation. Oil & gas commodities are price makers, not price takers as the officers and directors assumed they were for all these decades. One critical aspect of a price maker is that they only bring on new production when it’s profitable. The method we’ve developed is detailed in the Preliminary Specifications Preamble. 

Our decentralized production models price maker strategy engages North American oil & gas producers in disciplined production. Achieving maximum profitability can only be achieved when unprofitable properties stop diluting corporate earnings. Therefore the need to ensure they are fulfilling their primary task of maximizing profitability becomes the predominant method of production discipline. Competing on the capital markets of the 21st century, it will be much different than previous years. With technology and other industries providing growth opportunities, for oil & gas companies to continue to assert they are in a growth mode precludes them from that competition. They are a primary industry with commodities subject to price maker principles. An industry where shale reserves have changed the game from scarcity to abundance. This will also affect producer capital allocation and capital discipline. Capital investments will only be made assuming or demanding they will be immediately profitable. Why would they invest in them if they cannot meet that criteria? This implies a very different approach to what is done in the industry. We can cast the foolishness of “building balance sheets” and the like on the scrap heap. Balance sheets are the fallout consequences of business management, not an objective or target.

Cash demands in the industry are presently one of producers' pressing concerns. A consistent theme that defines a cultural dependence on annual outside capital infusions. This is due to all producer costs outside of operations being more or less capitalized and then recognized as depletion over several decades. This includes capitalizing large percentages on overhead and interest. By not recognizing overhead costs in the current period producers can more easily declare specious profitability. However, the cash consumed in those overhead costs is not returned in the current period in the commodity prices charged to the consumer. These overhead costs will sit as assets on the balance sheet in property, plant and equipment, or as we call them “the unrecognized capital costs of prior production,” for the next few decades before they’ll be realized as depletion and returned as cash. Therefore the search for new cash each month to replenish the cash float has been the producers' issue for decades. When investors were willing, this was not an issue with the annual top up of investors' dollars being priced to cover these costs. Now the reality of their specious accounting haunts them daily as they try to find new cash sources to cover their basic overhead costs, each and every month. Working capital has been and will continue to be a crisis in the industry under the current business model. No matter what commodity price is offered. 

Basic cash management would have indicated this to officers and directors many decades ago. I wonder why they never changed these methods? (I’m sure they had their reasons! Other interested parties should ask these probing, and revealing questions.) With the Preliminary Specification recognizing overhead in the current period as part of the operation, capturing that in the price charged to the consumer, return of the cash to the producer will occur within that production month. That however assumes profitable operations are conducted and all costs are accounted for appropriately. I’m on record, and allege that hasn’t happened. Calling the producers' accounting specious and deliberately misleading. I do sometimes wonder what costs are contained in capitalized overhead that no one appears to know or question? Both in terms of their size and composition. I do know each account never breaches the level of materiality during the annual audit, but outside of that these state secrets seem to me to be the reason that officers and directors have never changed these methods despite the negative consequences they cause and the Preliminary Specifications availability since August 2012.

Our user community and their service providers are involved in the delivery of the explicit knowledge captured in our ERP software and the tacit knowledge of individuals within each service provider firm. Fulfilling the accounting and administrative needs of producers with variable, industry-based accounting and administrative capacity and capability. We are delivering these in what we’re calling Cloud Administration & Accounting for Oil & Gas. Building and leveraging the same principles of specialization and division of labor that deliver cloud computing's extreme value proposition.

With the clear objective of rebuilding the industry brick by brick, and stick by stick. This is in a style of rebuilding that involves a dynamic industry based on a decentralized, connected environment such as the Internet provides. People, Ideas & Objects et al don’t have to break down oil & gas to rebuild it. The rebuilding is necessary due to the damage and destruction the chronic mistreatment industry has experienced at the hands of the officers and directors of the producer firms. Hierarchical strata of advanced paper shufflers define future failure. To bring about an ERP system for the industry such as the Preliminary Specification provides, we must consider the opportunity of disintermediation. And People, Ideas & Objects, our user community and their service provider organizations abide. 

The nature of this rebuilding process is the cannibalization of the processes that have occurred since investors sent their dissatisfaction message to producers in 2015. Being solely dependent upon investor cash meant organization cuts were necessary. This was when the producers' sole source of value generation, the investors' annual injection of additional capital, was no longer available. Keeping production processes in place was the priority and those processes involved in the early stages of oil & gas development were subject to layoffs. Assuming that the situation is alleviated in the following year and any resources recalled. Since the inactivity and abstinence of the officers and directors has continued for eight years, we can assume that the process management has been cut well into the eighth year of the development cycle. Therefore either way, through People, Ideas & Objects or SAP, the processes will need to be redefined and rebuilt. And if a producer chooses SAP as their current system, it should be final. People, Ideas & Objects will not build on SAP's proprietary and custom implementation. Producer firms must realize the Preliminary Specification is an oil & gas implementation based on its Intellectual Property. We are not looking to support or recreate any past failed policies and procedures no matter how inert they may appear. People, Ideas & Objects expect the same from SAP in terms of respecting our Intellectual Property.

However, bringing one of the most complex systems, Oracle Cloud ERP, into one of the most complex industries into the environment of the small and startup, or any producer, is a risky proposition to consider. How could that ever be a commercial software product? Or be provided to a commercially viable small or junior oil & gas producer? And that is the fact of the issue we are facing today as a result of the officers and directors “consolidation as a solution” or with SAP as alternatives. We need to ensure the future of the industry is in the hands of oil & gas men and women. They will knock down the barriers that stand in their way, just as so many have done before. The constraints and reality of regulatory, compliance and investment demands are real impediments to these needs. That is, if producers could not access the kind of systems necessary to operate in that environment, no matter their size, capital markets would remain forever closed. Today, this is an untenable barrier, and it will be even more so in the near future. Investors have explicitly requested Tier 1 ERP systems be implemented. Therefore all producers need to understand that the production discipline provided by the Preliminary Specification is necessary across all classifications of producer firms.

Under the Preliminary Specification a startup or junior producer would no longer need to establish the point where they’ll have to generate the full $3 to $5 million of free cash flow necessary to offset the annual base overhead of the producer firm. For administrative and accounting purposes, they will only incur the variable overhead costs of the service providers fees that they use. In addition, they will incur the costs of software development assessment by People, Ideas & Objects each year. As we noted earlier, not only are these overhead costs variable, but if they’re charged, that denotes profitable production. This indicates these costs are covered. In contrast, if the property is not producing it does not incur any overhead costs. And there are more attributes of our system that benefit the new oil & gas industry we are rebuilding. 

The Preliminary Specification also implements specialization and the division of labor across the producer firms, particularly in the earth science & engineering capabilities and capacities. As a first step in our solution for startups and junior producers, we listed this as the first step. These capacities and capabilities are becoming increasingly burdensome to each producer firm due to their unshared and unshareable nature. However, they are for different reasons than the administrative and accounting difficulties mentioned. The costs incurred to maintain these capabilities are growing as a result of the advancement of their science and technological development. This requires further specialization of the producers' capabilities, and critical competitive advantages. We believe that all producers have reached the point where the demands to maintain these capacities and capabilities have expanded beyond the usable population of these technical resources. Or will soon. With the retirement of the brain trust of the industry, and the universities not producing anywhere near the replacement number necessary, a critical shortage will soon demand that these technical resources will become too rare, too costly and too unavailable to maintain, not to mention, expand the deliverability of the North America-based industry. 

Consolidated producers will have particular difficulty managing this technical resource when entrepreneurs see the startup opportunities we’re defining here. That is, if only there was an ERP system that provided a solution for oil & gas startups to deal with the compliance, governance and regulatory environment. This would enable them to access funding! In addition to this limited technical resource supply we also believe that producers' firms are reaching a point where the costs of their scientific engineering and geology needs are beyond their commercial grasp and necessary to maintain their just-in-time operator status. Even so, a higher level of specialization and division of labor will be needed in earth science & engineering. It is the unshared and unshareable characteristics of these capabilities that we find the nascent difficulties to overcome. As operators, producers require these technical resources for a variety of just-in-time purposes. If we assume that across the industry the utilization rate of these technical resources is 75% due to organizational inefficiencies. Then by releasing that other 25% and deploying that unused and unusable capability more effectively we’ll have what I believe to be the second aspect of the solution to these pending and most certainly future difficulties. A one-third increase in capacity with higher output from enhanced specialization and division of labor, providing a good start to solving this pending critical resource shortfall.

Instead of letting another issue manifest itself as a crisis level issue, People, Ideas & Objects et al have implemented a variety of changes within the Preliminary Specification. As soon as the Preliminary Specification becomes operational, the producer firm will have two revenue streams. Their oil & gas sales are augmented by their earth science & engineering capabilities being deployed and used for revenue generation. The individuals can consult with one of the producers' own Joint Operating Committees or with other producers / Joint Operating Committees, as their clients. Due to the specialization and division of labor demands producers will need to choose to specialize or acquire specific capabilities and competitive advantages. These producer revenues will then offset engineering and geological costs incurred and charged to Joint Operating Committees or other producer clients. And through this enhanced specialization and division of labor, we achieve the same benefits of the 240 fold increase in productivity that Adam Smith experienced in his pin factory.

The second source of revenue should be seen as the starting point of oil and gas industry startup revenues. The startup's capabilities and competitive advantage will be less specialized than those of more advanced companies. The additional costs of head office operations not considered in the administrative and accounting category will be offset by these revenues. And this will apply to all producers no matter their production profile. When producers specialize in their distinct competitive advantages, and all producers including Exxon, Shell and Chevron will need to do so, the demand for outside technical resources will be required to augment their needs.

In a world where software defines and supports organizations. This is some of the what, how and why we can provide when the Preliminary Specification is delivered to all producers in the North American industry. Instead of being mere serfs as the officers and directors wish to continue treating the engineers and geologists, they’ll be able to take control of their careers from this point forward. The facility most responsible for this capability of making direct labor charges to the Joint Operating Committee is what we are implementing in the industry. This is our Work Order. Officers and directors may claim that charging labor directly is already available through their systems. Which is true, they can allocate some of these labor costs to the field. However, some are assumed to be captured in overhead allowances which the Preliminary Specification eliminates the use of. However their methods do not provide the necessary features of raising it to the point of making it a defined revenue stream for the firm. Its ability to interact throughout the industry is also a benefit. Allowing for interactions between resources and where they need them. Subject to appropriate approvals and governance. Theirs does not enable the second purpose of our Work Order system, which promotes industry-wide innovation through the establishment of working groups etc. Our Work Order system bills its costs at all times to corporate overhead, Joint Operating Committee overhead, an AFE or to a lease. Therefore the billable time of the individual engineer or geologist should be deployed within the producer 100% of the time or not be working for the producer. A fundamental component of this is requiring these people to establish their own producer firms. These firms are based on their earth science and engineering competencies, capabilities, and Intellectual Property. An industry where it will be less about who you know, but what you know and what you're capable of delivering, what is the value proposition that you’re offering? Preliminary Specification facilitates dynamic, innovative, accountable and profitable oil & gas producers, whether they are startups, juniors, intermediates, seniors, or multinational companies.

New Growth Theory

People, Ideas & Objects has taken North American producers' administrative and accounting resources and reorganized them into independent, individual service providers. This has allowed them to focus on one process and turn producers' overhead costs variable, based on profitable production. In turn none of the producers' costs are fixed in the Preliminary Specification. Creating six substantial value propositions that are tangible and clearly evident. Which include:

Secondly and perhaps more importantly in terms of building value for the greater North American oil & gas economy. Specialization and the division of labor which has proven to be the primary method of generating all tangible value for western civilization since 1776. Based on these principles, we have reorganized administrative and accounting resources to build value to ensure profitable operations. Specialization and division of labor will enable industries to enhance productivity in unknown, unquantified and unqualified ways. We facilitate this through our permanent software development capability, our user community, and their service provider organizations implementing these principles.

We have adopted an incremental method of building value on top of these two methods through Professor Paul M. Romer’s “New Growth Theory” of non-rival costs. In a December 1, 2001 Reason article he summarized his theory as “People, Ideas & Things.” Throughout the Preliminary Specification we've adopted these principles and named this initiative People, Ideas & Objects as we are object-based software developers. Using Professor Romers' "New Growth Theory" and non-rival costs, we've elevated them to an Organizational Construct. Standing on the shoulders of giants and especially Adam Smith’s Specialization and Division of Labor. Professor Romer has elevated business thinking in this direction and it is the next frontier in building value for organizations through the mitigation of costs in substantial yet unquantifiable ways to enhance the performance of those that use these methods. 

Professor Romer’s theory is the basis of how cloud computing has brought value to our economy. Users can share the costs of heavy capital investment in technology, capacity, capabilities, resources, maintenance and support costs and turn them into variable costs. Variable based on usage. Conversely service providers can enhance their service offering through specialization and division of labor which would otherwise be unavailable to individual organizations. We have extended this thinking to include not only Oracle Cloud ERP but also oil & gas administrative and accounting functions to be managed as shared and shareable resources. Eliminating the need for each producer to build, resource and maintain the necessary non-competitive accounting and administrative infrastructure they need as dynamic, innovative, accountable and profitable oil & gas producers. Providing a standard, objective and value driven service that shares the sole objective of ensuring oil & gas producers achieve the most profitable means of oil & gas operations, everywhere and always.  

Professor Romer's theories are one of seven Organizational Constructs of the Preliminary Specification. All seven are focused on building value for producers and providing tangible means to do so. In this proposed configuration, they are available through the Preliminary Specification, our user community, and their service provider organizations. Creating the culture necessary for the industry to be dynamic, innovative, accountable and profitable. The culture will be established with permanent software development capabilities and our user community. This culture will iterate on these principles over time to bring further value to the industry. 

Professor Paul M. Romer

Published in October 1990 “Endogenous Technological Change” became the foundation of “New Growth Theory” in economics that has developed and provides value throughout the economy through its application. In a Reason Magazine interview Professor Romer explained many of the points.

Growth in this model is driven by technological change that arises from intentional investment decisions made by profit-maximizing agents. The distinguishing feature of the technology as an input is that it is neither a conventional good nor a public good; it is a non-rival, partially excludable good. Because of the nonconvexity introduced by a nonrival good, price-taking competition cannot be supported. Instead, the equilibrium is one with monopolistic competition. The main conclusions are that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that having a large population is not sufficient to generate growth. S71

Professor Romer won the 2018 Nobel Prize in economics for these principles. It is our view that these are incremental value-adds to traditional specialization and division of labor. It is this principle of sharing non-rival costs that will mitigate what we believe to be the secondary reason for the systemic lack of profitability in oil & gas. In general, overhead costs are currently corporate. We will shift responsibility for those expenses and charge the actual, factual overhead costs incurred by service providers' billings directly to the individual Joint Operating Committee. There they become a cost of a property product and are captured in the sale price of the commodities. Through the sale, these funds are recaptured and returned to the company, which are used for overhead costs for the following month, etc. Currently producers capitalize overhead costs and therefore sell their product below its actual cost and are not recovering the cash spent on monthly overhead expenses. As they state, they're “putting cash in the ground” and building balance sheets." Constantly sourcing new cash to finance their overhead expenses each month.

By sharing the administrative and accounting infrastructure, turning these costs variable based on profitable production, and applying automation, specialization and the division of labor to the administrative and accounting areas. Through the development of our user communities and service provider organizations. And then delivering to industry our Cloud Administration & Accounting for Oil & Gas software and service. People, Ideas & Objects are adding real value to North American producers in terms of resolving what are their largest impediments to profitability. Chronic overproduction, or unprofitable production as we describe it and high overhead costs. 

Oracle CloudWorld 2022 Conference

It was during this conference that it became apparent that Oracle was pursuing the incremental value adding process that Professor Romer defined in his paper “Endogenous Technological Change.” Augmenting their generic business processes with service providers such as banks and logistics companies with fully optimized and integrated services with Oracle Cloud ERP, just as People, Ideas & Objects are approaching the unique oil & gas attributes. We all have an extensive software development workload ahead. I see at least 20 years of work in this area. Continually improving upon prior innovations. 

The most impressive example provided during the conference was the expense reporting features of J.P. Morgan Chase. If an employee uses their credit card for business, they can choose the type of expense to be classified. Oracle Cloud ERP would evaluate the charge based on the company's policies and determine its eligibility. If eligible it would be processed and payment made to the employee or the credit card company. Eliminating the massive number of hours and costs incurred in expense reporting by organizations during the year in their current systems. This is reduced to a few milliseconds of processing time. While the cost to the organization to use Oracle Cloud ERP is incidental in terms of the time spent on Oracle Cloud Infrastructure. As well as the engineering costs associated with the development of the specific system the software engineering costs are amortized across the global population of Oracle Cloud ERP customers using the feature. To a lesser extent People, Ideas & Objects provide this level of service to North American producers for their unique oil & gas attributes. The lesser extent is due to the smaller population of oil & gas users for which this development and implementation will be targeted. As such, North American producers have the opportunity to realize both Oracle and People, Ideas & Objects innovations concurrently and at substantially reduced costs. These are due to Professor Paul Romer's theories.

Intellectual Property

People, Ideas & Objects establish the need to rebuild the oil & gas industry and producer firms. This is due to the damage and destruction caused by producers' officers and directors. Their “muddle along” strategy has instilled a “do nothing” culture that provides a status quo existence that has not and will never change. Even the event of 2015 and all subsequent years in which investors have refused to participate further in the industry has not prompted a response or action. Where does motivation come from to efficiently and effectively conduct this rebuild? Oil & gas is one of the most advanced science and technology industries. One that demands innovation and iterative development of those sciences to ensure adequate reserves and production are provided by a dynamic, innovative, accountable and profitable oil & gas and service industry. And to ensure that it always meets the conflicting objective of ensuring consumers are provided with abundant, long-term supplies of reliable and affordable oil & gas. 

The importance of Intellectual Property in the oil & gas industry is that it will organize innovation. The most productive innovation is when it’s organized under a structure that enables the market to focus on its development. The North American marketplace established Intellectual Property centuries ago and we have reaped its benefits. The United States included copyright in its Constitution. Copyright must be published to earn it. Exposing it to the marketplace of ideas where it can be built upon and enhanced by others. It reduces the “me-too” phenomenon that oil & gas bureaucrats have created and benefited from to generate price competition in the service industry, elsewhere and to ensure everyone was rendered “blind sleepwalking agents of whomever fed them.” Is this the method that an innovative industry is built upon? With bureaucrats sitting on top of the primary industry of oil & gas and using its revenues to endow their favors with a penny or two here and there? 

The organizational structure of the proposed oil & gas industry People, Ideas & Objects et al are rebuilding will be based on Intellectual Property and innovation. Structured and based on the laws of the land. These laws will define what innovation is undertaken and what is not. Violation of another's copyright or other Intellectual Property is not allowable under the law so there cannot be any violators. A self-policing mechanism reduces the overall costs of unnecessary innovation duplication. Focusing energy and resources on profitable innovations in products and services. Providing the incentive and motivation for those with the ideas to do the hard work of making those developments. Fully protected from Intellectual Property poaching that's actively sponsored by producers, officers and directors. Which is culturally ingrained and accepted by them in oil & gas today. And to do so not just today, but always and everywhere. 

Copyrighted publications enable an understanding of how things are done. Providing the means to build upon that understanding with additional innovations. Intellectual Property therefore provides us with a strong legal structure that encourages innovation, eliminates the costly redundancy of duplication of efforts, educates and ensures the necessary legal protection to enable the motivation for the individual to do the difficult and challenging work we can all agree is the foundation of the industry. This applies across the greater oil & gas economic structure which includes all secondary and tertiary industries. The 21st century will be known for Intellectual Property leverage. Much like the last century leveraged mechanical effort. For officers and directors to avoid this or opt out is foolhardy in the extreme.

What is the motivation for people to develop their “ideas?” Are they not, just like the bureaucrats, in it for themselves and looking to siphon off what they can from the industry? Self interest is part of human endeavor. It comes down to whether or not it builds value. Self-interested officers and directors have been well compensated while the industry has been destroyed. A contrast due to the fact that they’ve not been motivated by the discovery of ways to create value. Intellectual Property is therefore not only a structural organizational component that can enable control of the innovation process throughout the industry. The participants are motivated to build value through incremental profitability, cost reduction, enhanced production deliverability or reserve expansion. It is the law, and most importantly, it is proven. The reason the United States dominates in the manner that it does is due to the fact Intellectual Property laws provide the motivational and organizational principles of how their economy and society operate. It assumes people are intelligent beings, not serfs like bureaucrats. It is productive, constructive, focused on generating value and benefits society. Otherwise why would individuals do the difficult work that’s necessary? By bureaucratic command? As a science and technology business, that is refuted to be second only to the space industry in terms of complexity. What has and what have these bureaucracies done under their business model?

Difficult work needs to be undertaken in a complex science and technology-based industry in a 21st century business environment. Oil & gas is a critical necessity for our economy and way of life. One in which the environment and organizations we are presented with today can be assessed as wholly inadequate to meet those needs both today and in the future. And what is potentially more difficult is they’ve shown no propensity to recognize any of its issues or the need to make any changes. There is a need for significant development in all aspects of the greater oil & gas economy during this rebuilding period. A method of organization will be the first element necessary for a solution. However we have to address the issue of how that organization is formed and the subsequent pieces are put in place. The need to understand “how” those involved in this rebuilding will be motivated to do this difficult work and where they can fit in is addressed in the Preliminary Specification. This is accomplished through the adoption of Intellectual Property as an organizational construct. This is defined and supported by the software and services People Ideas & Objects et al propose in this RFP.

People, Ideas & Objects, our user community and their service provider organizations focus on providing all North American oil & gas producers with Cloud Administration & Accounting for Oil & Gas. To ensure startup, small and junior oil & gas producers receive all the Preliminary Specification capabilities and capacities. This is due to the critical role and nature of their existence in terms of dynamism and innovation. Currently we have a market in oil & gas where officers and directors point to the startup to junior producers as causing the difficulties we’ve seen in the industry. In fact they may have become the officers and directors' most recent viable scapegoat! Our focus is appropriate, and we can ensure these producers can enter the industry with fewer barriers to entry. We do this by providing all producers with the means to generate a second source of permanent revenue from day one. A ready market where demand and coordination for the markets earth science & engineering resources will be made available through the Preliminary Specifications Work Order, Resource Marketplace, Research & Capabilities and Knowledge & Learning modules. Providing them with the cash to pay their mortgage, Internet, work from home and skip past the dog food aisle for their families' nutrition. Incorporating their experience, skills, knowledge, and ideas into the broader market for oil and gas. We also eliminate that impossible wall of never ending overhead costs that consume investors' dollars year after year. This is the base of fixed overhead of the small to junior producer. Which is and has been the cause of their demise today. It didn’t matter how advanced their technical skills were, that’s not what determined their success or failure as a startup oil & gas producer. Instead, it was if they could get past that wall of base overhead costs. 

Officers and directors know the Preliminary Specification establishes a strong foundation for Intellectual Property of individuals within the industry. This value becomes available to those original authors, innovators and entrepreneurs which is in turn marketed to oil & gas producer firms whose distinct competitive advantages include the coordination of the markets earth science & engineering capabilities and their land & asset base. This is provided through the Preliminary Specifications Resource Marketplace, Research & Capabilities and Knowledge & Learning modules that were published in final form in August 2012. From the Resource Marketplace module I summarized the points as follows.

Another key point is the tearing down of the existing Intellectual Property culture. An industry such as oil & gas is based on earth science & engineering needs. After all, it is a science-based business. If we are to expand the capabilities of science and innovation in the industry, we have to address many difficult problems. And as we progress, the volume of ideas needed will be an order of magnitude greater than what is required today. These problems cannot be addressed in an environment where there is no incentive for individuals to solve them. Addressing the motivation to solve these problems and enabling the people to earn the rights to the Intellectual Property within the People, Ideas & Objects application modules is the first step in making the necessary industry wide changes. This will turn the oil & gas industry into a more dynamic business.

With the oil & gas industry fundamentally destroyed as it is, its Intellectual Property is also in disarray. The capabilities and capacities are deteriorating as we speak. Making this an Intellectual Property gold rush in the industry, to save it from bureaucrats. However, employment contracts may have clauses that state that while working for them, any product is theirs. Consolidated producers' difficulty is that none of this is published and the act of publishing is how copyright is earned. Patents and trademarks are defensive, in that they protect what is known of Intellectual Property at a time. Copyright is offensive and allows Intellectual Property expansion through the creation of derivative works. Copyright does not secure idea rights. It only grants monopoly rights to the expression of that idea. In other words, it must be pursued and maintained as I do here. 

It is particularly relevant to consider Intellectual Property Rights in an industry that coordinates market capabilities for earth science & engineering, along with its land & asset base. These seem diametrically opposed in terms of how they function. What People, Ideas & Objects suggest is that there is no need and no benefit in having the producer firms own any of the Intellectual Property that supports “what, how and why” the industry operates. We need to address the motivation for how the industry progresses, how science and technology progresses innovatively and quickly. And address why this hasn’t been the case. 

This Intellectual Property section of our RFP Response is ripe with conflict and contradiction. We stated earlier that shale science and technology were the most advanced, yet belittled its development over the past years. The contradiction is that I’m only suggesting oil & gas producers are static. The development and implementation of shale technology would have taken place decades earlier if producers had kept up with progress in the service industry. It is there, in the service industry where all innovation and development occurs. There is no benefit to a producer owning Intellectual Property on a drill bit. And we are extending Intellectual Property deployment to the sciences of geology and engineering. What have been the bottlenecks to the further development of the industry over the past few decades? 

Business changes quickly. Intel's dominance in the market is now a constraint that causes them to lag the market in consequential ways. As the dominant processor manufacturer, it has been deemed a redundant business model. Business value is no longer in processor manufacturing, it's in their design. Contract manufacturing is a commodity business where others find profits and opportunities in that area where Intel cannot compete. In terms of design being the value, that is now the case. People should read the summary of Ampere Computing’s Leadership Team that now has one of the most powerful processors available. Oracle (a major shareholder) has moved their high performance cloud offering to Ampere processors, which Oracle’s Cloud offers today. 

This is the changing business world and there are more innovative business models. It comes down to one word, the individual. To organize society today, with its global reach, cannot be done spontaneously. There is no serendipity when individual A meets individual B 1,000 miles away on the Internet. This is done through software providing them with the means to conduct their business. Software defines and supports this organization style. Without People, Ideas & Objects none of this oil & gas vision will come about by sitting and waiting for the phone to ring. At least it hasn’t happened yet.

The question also needs to be asked: why does Apple continue to innovate consistently? Although their products are more costly, they earn in excess of 80% of the profits of the mobile phone industry. In addition, they bring incremental value to their customers through innovation. They too rely on Intellectual Property as the basis of their value. They consider themselves a software company that sells hardware to bring customer value. Software defines and supports organizations. Who would run a company that sources products from a number of countries that total 3.5 billion in population? And then snap their fingers and say “now innovate.” It doesn’t happen without software.

For producers to double and triple down on their failed vision is the method chosen to resolve the oil & gas industry and producer issues. This is done by the current officers and directors. Raising the viable scapegoat that it's the small producers who are overproducing to meet their bank payments is causing the disaster in the industry today. When officers and directors raise this argument we see the source of their own future demise. For them to admit the overproduction issue is attributable to their own actions would never cross their minds. Everything is always someone else's fault. Should they be successful in implementing SAP or other means to secure their method of organization and management this will most certainly continue.

We’ve defined our alternative vision in the Preliminary Specification. We would note that it’s in stark contrast to the clean energy vision producers and SAP are transitioning to. Disintermediation is best defined as the removal of bureaucracy and red tape rendered redundant through the Internet. Although the world is unaware of “how” and “what” the producers current consolidation driven vision will operate as, or any details, we can only speculate as to why it’s being done when all other industries are, and not by choice, finding efficiency in the decentralized methods of organization and disintermediation through technology. People, Ideas & Objects have repeatedly stated the fact that each boe provides 10 to 25 thousand man hours of equivalent labor, or 28 to 71 times the entire global population. Officers and directors capitulation of shale resources for clean energy should be seen as irresponsible when we understand that it’s the world's most powerful economy that is the largest consumer of energy. Why aren't officers and directors seeking profitability in shale? 

Due to the demands for market coordination of earth science & engineering resources in the near future, we've discussed how specialization and the division of labor are used in the Preliminary Specification to deal with these associated resource demand issues. Conceptually we have implemented the pooling concept where the ability to have the Joint Operating Committee assigned with the available technical resources of each producer firm would be how the property was managed from an earth science & engineering perspective. Pooling replaces the operator role. Establishing the second source of revenue for the producer and its supporting administrative infrastructure is in the Preliminary Specification. We have also implemented the necessary governance model to support these resources with the appropriate organizational structure. This is to ensure effective operations across the producer and each Joint Operating Committee. 

Two other interesting aspects of Intellectual Property are first, safe harbor provisions. Why don't producers turn around and sue the copyright holders? This would be an unfortunate world where “big” ruled the earth and we serfs would be the drones who were forced to comply with their every command. The safe harbor provision states that people cannot sue the copyright holder. Secondly, the division of tacit and explicit knowledge. Tacit knowledge cannot be captured or written down. Only explicit knowledge can. Therefore it is up to people to take the explicit knowledge they have secured and apply their tacit knowledge as a service. This will support their Intellectual Property and generate value. These services are as relevant as Intellectual Property itself. Just as People, Ideas & Objects user communities service provider organizations deliver our software and tacit knowledge to producer firms.

There is no question that People, Ideas & Objects user community and their service provider organizations are Organizational Constructs, market supporting institutions and a critical element of the future success of the oil & gas industry. Intellectual Property is the foundation of their formation, organization and delivery of value to the oil & gas industry. The configuration of their Intellectual Property however is fundamentally different from what is described here for the engineering and geological sciences. It is for that reason that they are given specific pages within this wiki. These pages deal with the unique characteristics of their Intellectual Property and how that is developed, implemented and employed.

Innovation

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

Enter two variables not available in prior decades and centuries. The cloud computing era coincides with the maturation of the overall technological infrastructure represented by the Internet. We are in the infancy of the Internet. Second, we have the "service" aspect of our user communities. We found that the level of innovation attributed to the small and medium sectors of an industry was as substantial as the larger sectors. Although the larger sectors contributed large amounts of total spending, their impact was no greater than the other sectors contributed. Professor Giovanni Dosi was one of the key sources of research we used to determine the framework necessary for an innovative oil & gas industry. Innovation within a science and engineering-based business is therefore an inherent part of profitable operations and consumer affordability. 

Professor Giovanni Dosi was one of our primary sources of innovation research. His paper “Sources, Procedures, and Microeconomic Effects of Innovation” September 1988, discusses and asks what are “the sources of innovations opportunities, what are the roles of markets in allocating resources to the exploration of these opportunities”?

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

The main characteristics of the innovation process. 

The factors that are conducive to or hinder the development of new processes of production and new products.

The processes that determine the selection of particular innovations and their effects on industrial structures.  (p. 1121). 

There are two major sets of issues here: first, the characterization in general of the innovative process.

And second, the interpretation of the factors that account for observed differences in the modes of innovative search and in the rates of innovation between different sectors and firms, and over time. (p. 1121). 

Professor Dosi then states: 

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

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

People, Ideas & Objects research in oil & gas focuses on organizational capability. Moreover, innovation depends both on the firm and the industry. Coordination of the capabilities and stimuli of both the firm and the industry would therefore need to be advanced through changes in the organizational structure of both.

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

Additional issues include 

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

As People, Ideas & Objects suggest, these define an Organizational Construct that innovation demands to either flounder or flourish. As both an Organizational Construct in itself, and as we outlined in the Joint Operating Committee as a framework for that construct. What we can conclude from this definition of innovation is that it is a defined and replicable process that can be established through an organization's design. And this design can be part of the organization's ERP software that identifies and supports that organization and its industry. The Preliminary Specification accomplishes this.

Our second source of primary research material came from Professor Richard N. Langlois. Throughout our review of his work we determined the appropriate nature of the organizational design of the producer firm and the oil & gas industry. We selected specific areas of the firm or market where process and management capabilities should reside. By fully implementing the Internet and using Professor Langlois' research, which included Professor Carliss Baldwin's determination of where exactly that transfer between firm and market should occur. We designed the appropriate software tools, such as our task and transfer system. Enabling our user community to define which processes to undertake and manage in their service provider operations. Introducing enhanced efficiency in oil & gas administration and accounting. 

And building on other innovations that generate value, such as cloud computing. People, Ideas & Objects, our user community and service provider organizations can accomplish this through the introduction of our Cloud Administration & Accounting for Oil & Gas. A service that operates with Oracle Cloud ERP and turns fixed producer overhead into variable industry-based overhead. This can be provided to any producer no matter what their size or production profile. Enabling producers to shut-in unprofitable production, incur a null operation, and only produce profitable properties to maximize corporate profitability and shareholder value. A substantial portion of our published value proposition of $25.7 to $45.7 trillion over the next 25 years is attributable to introducing this production discipline. This is to eliminate the chronic overproduction, damage and destruction.

Speaking of value propositions priced in trillions of dollars, People, Ideas & Objects have started a definitive trend. ARK Investment CEO Cathie Wood suggests that innovation makes up $8 trillion of global public equity markets. She also suggests that this will grow exponentially to over $200 trillion in value in the next 8 - 10 years (2030). Moving from a 10% valuation of the total equity markets today to 60% of the global equity markets. All as a result of technology's capacity to disintermediate and the introduction of revolutionary business models that will “disrupt the traditional world order.” People, Ideas & Objects published our value proposition in 2012 and have held to those numbers. They are far less shocking and ridiculous than when initially proposed. What I would suggest regarding the oil & gas industry is that the $8 trillion in Ms. Wood’s estimate doesn’t include any innovative values from the producers. There are none. All innovation is done in the service industry. And it is undetermined at this point if any of the $200 trillion innovation estimate will be realized in North American oil & gas.

Let's set the tone for engineering and geological demands. People, Ideas & Objects have identified substantial capital cost structures that include the costs of:

Recovery of the past property, plant and equipment account balances, or as we describe them, the unrecognized capital cost of prior production. Whereas if recognized today and these costs were passed to the consumer, would provide incremental cash flow to provide dividends in compensation for past excessive reliance on investors.

The refurbishment of the infrastructure as it stands today. 

The rebuilding and expansion of the infrastructure and production deliverability to attain and maintain energy independence. 

And finally the looming and escalating reclamation costs of the industries past. 

Producers will incur these costs as a result of providing energy to consumers. Without a means of passing these capital costs on to the consumers, such as the Preliminary Specification does, they will bankrupt the industry, or their investors under the officers and directors current business model of “building balance sheets” and “putting cash in the ground.” Methods that we believe will not be recaptured in any software implementation conducted by the industry officers and directors choosing to move to SAP. Infrastructure and production deliverability expansion will be the largest costs. A dynamic, innovative, accountable, and profitable oil & gas industry presents the greatest opportunity for everyone. The focus here is on their secondary and tertiary industries. Having a dynamic, innovative, accountable and profitable business model and means to deal with these costs is an urgent priority.

The Preliminary Specification has captured this understanding of innovation and incorporated it within the innovation framework of the Joint Operating Committee and Innovation Organizational Construct. Each of the fourteen modules of the Preliminary Specification is materially affected when we identify the Joint Operating Committee as the key organizational construct. That provides us with an opportunity to incorporate this understanding of innovation into the design and reorganization of the oil & gas producer firm and industry. These can be identified by several major design processes within the Preliminary Specification. One of these ensures that innovation and its underlying processes are not repeated in separate and distinct areas of the organization each year. Repetition of failed ideas is not innovation. By building creative ideas based on prior failures, we can move forward in new directions. Another major aspect of innovation is improving the scientific basis of producer firms and the industry as a whole. Moving forward on the basis that an idea that generates a dollar today will only produce ten cents tomorrow. We therefore must increase the volume of ideas generated and incorporated into our work processes to continue enhancing our value. Various other innovation processes have been incorporated throughout the Preliminary Specification based on primary research conducted by Professors Giovanni Dosi and Richard N. Langlois. Enabling producers to earn unquantifiable trillions of dollars of increased value above what has been quantified here, for decades to come.

Markets

The Preliminary Specifications marketplace modules include the Financial, Petroleum Lease and Resource Marketplace modules. Each replicates the three primary markets in which a producer actively participates daily. Seeking to profitably and innovatively apply their distinct competitive advantages, 

The Petroleum Lease Marketplace module is exactly what you expect. An opportunity to post, bid, purchase, and sell mineral rights and producing properties in the marketplace that exists and is replicated virtually within the Petroleum Lease Marketplace module. Everything from the opportunity to participate in a joint venture to establishing and ensuring surface rights payments are fully supported by our Cloud Administration & Accounting for Oil & Gas of the Preliminary Specification. Our ERP product sits on top of Oracle Cloud ERP which includes Tier 1, Oracle Fusion Applications. Gartner ranks it as the best ERP solution on the market. These oil & gas Marketplace modules include Federal, State, Provincial, Freehold and Offshore leases. Industry can consolidate on a dynamic platform that uses proven Tier 1 technologies with service providers' constant support. All within a dynamic platform that maintains transaction administration, standard and objective accounting. 

This will be enhanced by the constant iterative design and development being undertaken by People, Ideas & Objects user community and developers on a permanent basis. This will be available through our Cloud Administration & Accounting for Oil & Gas service. While if a jurisdiction reviewed and changed their royalty rates at some point, in terms of either the rate or method calculated, producers would not need to concern themselves with the administrative or accounting aspects of those changes. Changes to the software and services would be implemented in a timely and accurate manner by our user communities, developers, and service providers. Producers would only need to deal with revised royalty costs and performance consequences. 

As with the Resource Marketplace module we see many changes in this oil & gas marketplace. Which I would think producers would welcome at this point as financing is next to impossible for producers and particularly the service industry. We noted that the movement of knowledge to where decision rights were held, the Joint Operating Committee, enhances accountability. It's here that the Financial Marketplace enhances that accountability with the board of directors' interaction with their current and prospective shareholders and bankers. A review of the Financial Marketplace module specification would be the most comprehensive source of information to capture an overall understanding of the module. Furthermore, the Preliminary Specification and service providers' accounting are standardized and objective. Consider if that would satisfy some of the issues investors and bankers have raised regarding their investments and loans in the industry? With the Preliminary Specification everything being produced is profitable and producers seek to maximize their profits by shutting in unprofitable production. 

The three marketplace modules share the Marketplace Interface which is a virtual representation of the markets. The Marketplace Interface demos were prepared by the underlying technologies available to us at the time and over a decade ago. Much has developed in the technological environment since. There are many points I would argue are different today, including.

Looking at the establishment of IT in other industries where technology has been embraced we can ask some interesting questions. Why is there such volume on the stock exchanges today? What are all those algorithms doing? It’s been more than two decades that they’ve existed. How can Elon Musk outperform NASA, Ford and GM? And how is it that oil & gas is generally and rightly regarded as having many of the most advanced science and engineering Information Technologies available to it? Yet its business is about to be trashed? 

North America has advanced its overall quality of life through market and price discovery. The Preliminary Specification has therefore adopted these as part of the structures that define and support the oil & gas industry. Our decentralized production models price maker strategy relies on the principle of oil & gas commodities being priced based on their ability to satisfy the economic definition of a price maker. Producers must produce only profitable production, after full consideration of all costs on a timely and accurate basis. This is how they’ll operate under our ERP system and service provider offerings. Using all of the information contained within the commodity market price (production, inventory, consumption, reserves) to determine profitability and ultimately what will and will not be produced. It is the same mechanism involved in every transaction on a free market. 

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

The organizational question is whether new capabilities are best acquired through the market, through internal learning, or through some hybrid organizational form. And the answer will depend on (A) the already existing structure of capabilities and (B) the nature of the economic change involved. p. 20.

And

If by contrast, the old configuration of capabilities lies within large vertically integrated organizations, creative destruction may well take the form of markets superseding firms. History offers many examples of both. p. 20.

And

Either way it boils down to the same common-sense recognition, namely that individuals - and organizations - are necessarily limited in what they know how to do well. Indeed, the main interest of capabilities view is to understand what is distinctive about firms as unitary, historical organizations of cooperating individuals. p. 13.

We first need to discuss two components of how I see one of the marketplaces in oil & gas. Field service providers have a role to play in extending producers' capabilities and capacities into the regions of their focus. Owning and operating their own field infrastructure would otherwise hinder progress. The second component is the history of abuse and disrespect producers have displayed and presented to the service industry for over forty years. And especially since 2015, when they realized their financial difficulties were amplifying. Their assumption that oil & gas is a boom / bust industry has been accepted by producer bureaucrats. All other industries sought to work these issues out of their businesses and industries many years ago. It is this continuing acceptance that has left us with a legacy of six good years out of thirty seven. Officers and directors don’t understand this point as they’ve experienced thirty seven years of excellent compensation. 

Producers assume the service industry needs to adjust to the boom / bust trend in lock step with producers. There is an implied assumption that the service industry, like the oil & gas industry itself, enjoys revenues as a primary industry. Therefore, it continues business as usual during the bust cycle. The diversity of service industry offerings, and their coverage across various regions of North America spread them relatively thinly. As secondary industry participants their revenues are not persistent and therefore they are not as resilient as producers believe. The collapse of their revenue streams into the low teens has been devastating.

Now the consequences of this latest downturn have destroyed many service industries' capacities and capabilities once available to producers. This decline in support since 2015 on top of the cumulative difficulties imposed by oil & gas producers for decades has created a situation where many will struggle to survive. The largest service industry providers have left the continent due to abusive treatment. Therefore working out the boom / bust cycle through our price maker strategy will rectify this issue. This is done by providing a stable environment, or constant level of demand, in which the service industry can prosper. However, service industry investors have had it for this millennium. They invested in good faith and were repeatedly abused by the producer firms. They’ve witnessed the equipment they invested in being cut up for scrap metal. Horse power is sold off to other industries to survive. This was primarily due to producer bureaucrats determining they could get away with leveraging additional field activity by not paying their bills for 18 months after the jobs were completed. As their last source of capital to keep their show running. The dilemma today is who’s willing to provide the financial resources for the service industry to recapitalize itself? This will enable it to reestablish the capacities and capabilities necessary for a self-sufficient and profitable oil & gas industry? The Resource Marketplace module engages producers and service industry participants in constructive discussions regarding the oil & gas and service industry business. 

This is what’s known and understood on the market today. It's not news. Producers will expect the service industry to dance for their dollars just as they’ve always done. If People, Ideas & Objects are correct and no one plays that game, what would be the result? I would point to the example of the history of ERP providers in oil & gas over three decades. I can report that there is still no consideration of a second chance that first-tier ERP providers may rescue production firms. Why? They feel the industry is too complex, too costly and there are not enough producers to negotiate sales prices fairly. The last two Tier 1 ERP providers left in 2000 and 2005, as documented on page 17 of our White Paper. This was due to producers' inability to pay for software development in advance. Producers have never paid for ERP systems anyway, so why start? If as suspected SAP is being turned to by producers to satisfy investors' demands for Tier 1 ERP system level accountability. Based on a September 2022 SAP conference and their 14 page brochure. SAP will ensure they’re paid each month for each producer's integration.

Producers have had over a decade to invest in the Preliminary Specification to make their organizations profitable and avoid this inevitable, predictable and disastrous outcome but didn’t. Not a penny has been spent on People, Ideas & Objects at any point. As a result, producers will be responsible for all of the costs related to the development of the Preliminary Specifications and our user community. The need for skin in the game is the apt approach when so many ERP providers and their investors have been betrayed so comprehensively. This will be the necessary approach throughout the oil and gas industry rebuilding process.

Producers sit on revenue from their primary industries. (And mostly for enhanced, innovative, executive compensation, I question what's in those capitalized overhead accounts we never see.) Officers' and directors' inactions have consequences detrimental to everyone else in the industry. They will argue, rightly, that what we propose does not remind them of what markets and price discovery should look like. Correct, it's what’s necessary after the destruction of markets. It is the rebuilding process. These facts on the ground are what bureaucrats refuse to consider or admit. Until they do the industry will be plagued with problems. And they’ll never admit it. What they will do instead is leave which is the historical action other bureaucrats have taken in other industries since 1929. Which is possibly what they’re doing in their transition to clean energy. Taking oil & gas revenues with them. These issues need to be dealt with and I am unaware of another solution. The fact is officers and directors broke it, officers and directors of the producer firms will need to fix it. The need to rebuild these industries brick by brick and stick by stick must be financed by the only means available. Oil & gas industry revenues. Producer cash generated through our Preliminary Specifications decentralized production models. With active participation in the development of tertiary industries that support the primary industry of oil & gas. Or in other words, ultimately the consumers. Granted there will be those within the service industry that will continue to scrounge for the pennies falling from the bureaucrats' pockets. However, that does not create the dynamic, innovative, accountable, profitable and energy independent oil & gas industry that we need.

Information Technology

Our next Organizational Construct that defines how oil & gas producers operate in the Preliminary Specification of People, Ideas & Objects, our user community and their service provider organizations is the Information Technology environment. In terms of increased productivity, performance improvements, and leveraging a firm's business model, these have had a revolutionary impact on business. The promise of additional performance and productivity enhancements is available as these technologies mature and become more integrated. When applied to other Organizational Constructs such as specialization and the division of labor and Professor Paul Romer's shared or non-rival costs. Extensive leverage between the three can generate value for oil & gas.

The key technology today and the one we leverage throughout oil & gas administration and accounting is cloud technologies. Introducing a shared and shareable cost model for its users. This is how People, Ideas & Objects perceive Information Technology affecting producer firms' performance. With cloud computing, instead of incurring large capital, infrastructure and operating costs to acquire IT capabilities, users can access these needs for a variable monthly operating cost. This is a variable cost based on usage. The shared and shareable cost model doesn't end there. Producer users are supplied with the latest applications and technology service and support is enhanced. This is done through an enhanced and constantly evolving definition of specialization and division of labor. Cloud computing is expanding throughout the business community due to IT resources access. One that provides a lower overall cost, yet provides the full value of IT that would otherwise demand that each company invest in unique capacities and capabilities outside of their competitive advantages, and consume significant corporate resources and focus to build, achieve and maintain. 

If we look at the difficulties of “what, how and why” producers are consistently unprofitable. We see high overhead costs incurred within each producer that are the secondary cause of a systemic lack of corporate profitability. Building the necessary administrative & accounting capacities and capabilities, particularly in this regulatory environment, is costly to achieve and maintain. These costs are also incurred individually by each and every producer on an independent and isolated, or unshared and unshareable basis. These are not core strategic competitive advantages. We are faced with the same issues that earth science & engineering resources are faced with as a result of their advancement of specialization and the division of labor. The need for resources to cover each and every aspect of corporate administrative and accounting demands has or will soon exceed the commercial capacity of all producer firms. I would say it happened decades ago. People, Ideas & Objects' multi trillion dollar value proposition should show that the need for attention in the area of managing the business more effectively and efficiently is necessary, desirable, achievable and tangibly valuable. A shared and shareable business model through our Cloud Administration & Accounting for Oil & Gas will offer variable administrative and accounting state of the art capabilities and capacities. Providing lower costs from many distinct perspectives unavailable in the current business model. From an overall industry and individual producer perspective, a lower cost is due to the shared and shareable nature of these services. Conversion of fixed overhead to variable overhead, variable based on profitable production. Specialization and the division of labor increase the producer and industry throughput from the same resource base. These are just a few of the methods we use to provide oil & gas producers with the most profitable means of oil & gas operations. 

When we listen to customers who have implemented Oracle Cloud ERP applications within their organizations there are a number of consistent messages coming through that I find interesting. The first change is that their roles as senior management and officers change in response to the quarterly releases and upgrades of Oracle Cloud ERP. These now number around 200 additions per quarter. When the Preliminary Specification becomes operational, additional changes will be added to these Oracle changes.

People, Ideas & Objects would ask, based on the selection of which ERP solution is determined by producers' Board of Directors, how many of these quarterly changes will be the concern of producers' senior management and officers, or be handled on their behalf by our user community and their service provider organizations. The majority of these changes would be handled by our user community under the People, Ideas & Objects et al model. Service providers would implement, maintain and support them. With input from the producers funneled through to our user community, consolidated and optimized from the producers' point of view. This is a task that will be shared and shareable among producers senior management and officers. Ensuring effective and efficient producer process management, both from a time, effort and cost perspective. Which brings up a pertinent question. Who can effect change in this ERP ecosystem as proposed by People, Ideas & Objects et al? It is the greater oil & gas economy and most specifically our user community members that provide producers with the means to change the software and services. Our user community members will look for input on any and all information provided by the oil & gas industry. Our developers are deaf, dumb and blind to everyone except our user community members. Our user community members are the only ones licensed to develop derivative works from the Preliminary Specifications Intellectual Property.

The traditional approach to having an ERP system that caters to a specific industry is to customize the Tier 1 vendor's application to do so. Oracle frowns upon this and advises against it. People, Ideas & Objects have adopted Oracle’s policy on our user community and service provider licenses. Stating that application customizations are to be avoided at all costs. This certainly seems at odds with what we're doing. The point is subtle and distinct to Oracle Fusion Applications. Other than Workday they are the most recently developed applications for all ERP systems. Oracle Fusion Applications were the first to be written in the Java Programming Language which introduced the full object model to those applications. Providing inheritance, encapsulation and polymorphism on top of Oracle Autonomous Database as People, Ideas & Objects development environment. (Note: we are database developers.) Oracle Fusion Applications are supported by Oracle Fusion Middleware which is an enhanced Java Server with expanded functions and process management. It is generic and developed by Oracle Fusion developers. It is also the base of any "additions" written to provide industry specific application capabilities to Oracle Fusion Applications. Enabling People, Ideas & Objects to embed oil & gas industry features directly into Oracle Fusion Applications through Oracle Fusion Middleware as “additions.” 

This is opposed to industry customizations which traditionally sit on top of ERP applications. Oracle’s method avoids a key difficulty in an environment where users' needs are dynamic and changing. Any system changes at the Oracle Cloud ERP, or Fusion Application ERP level will not break customizations that sit on top of the Preliminary Specification, as there will be nothing there. Oracle quarterly releases will be embedded with "additions" from People, Ideas & Objects' own scheduled releases. Therefore, as they too are Java object-based, independently updated with their own enhanced and unique features, Java’s encapsulation leaves them unaffected by Oracle changes. Yet, I am satisfied that our application code base is separate and distinct from Oracle Fusion Middleware and Fusion Application code. Maintaining full control over our Intellectual Property that drives People, Ideas & Objects' competitive advantage. Oracle Fusion Applications and Middleware will soon have another unique feature. A feature called "Fusion - Zero Down Time.” Seems self explanatory. 

This next point is one of contention between the IT community and the business community. It is a method of implementation that is becoming increasingly the norm and the more successful method of ERP implementation. It is known as “rip and replace.” I subscribe to it for the time element of the roll out of the Preliminary Specification when completed in its commercial release. Please note it is the domain of our user community and service providers who will plan and conduct the implementations for each of their individual processes. Of course, this includes the producer firms. At this time rip and replace is the most appropriate implementation methodology for our rebuilding process.

We have implemented a policy not to map, provide product features, services or implementation for producers who have selected SAP in the market. Implementation of the Preliminary Specification will be conducted as written and prepared by our user community. There will be no shortcuts. Our competitive advantage relies heavily on Intellectual Property for People, Ideas, & Objects. Respecting other firms' Intellectual Property is necessary in the 21st century. We will also avoid those individuals who were involved in prior SAP implementations and or developments in prior work engagements. The latter being a minor change in our policies as we do not accept those Integrators who were “blind sleepwalking agents of whomever fed them.” Firms such as the major accounting firms, Accenture, Cognizant and the like. We are interested in solving oil & gas related issues, not arguing about cultural differences between the Preliminary Specification and the way it may have been done before. As we hold the officers and directors accountable for the damage and destruction caused to the North American producer population and service industry. We also see these groups share minor responsibilities for blindly doing what they were told. The people we're interested in participating in our user community are those who choose to work and have extensive experience in oil and gas administration & accounting. Can evaluate right from wrong and know intuitively the appropriate course of action. With the powerful tools provided in our user community vision, they can make the necessary changes.

Time is the demand that should focus producers on dealing with their shareholders' issues of accounting integrity, accountability, Tier 1 ERP systems use and the melting down of their financial position due to absolutely no capital structure. Time is People, Ideas & Objects' primary concern across North American producer markets. Therefore the need to focus the energies of the industry on this task will need to be a priority. Both from a software development and implementation perspective. Otherwise the industry will melt down and oil & gas will have failed in its primary role of providing affordable energy to the North American consumer. North Americans will become dependent on foreign energy sources to meet consumers' needs. And as we’ve noted, the most powerful economy in the world is also the largest energy consumer. These foreign sources of oil may hinder our ability to fulfill our traditional economic role. 

People, Ideas & Objects have chosen to pursue our user community, research and Intellectual Property as the three areas of focus for our competitive advantages. Note that none of these involve developing software code. We’ll own and provide the software code derivative of the Preliminary Specification and our Intellectual Property. We have contracted all of our software development to Oracle Corporation. Their services division is well versed in ERP products and ready and capable. We believe we would need to dedicate at least a half decade to assembling a team large enough to accomplish this project. We would then need to spend an unknown amount of effort to turn them into a functioning capable team competent to produce the quality of software necessary. Instead, we've been working on our user community development since the first quarter of 2014. A task we’ve prioritized since then. One that differentiates our product offering by quality. Time is not a commodity available to producers at this stage. The time we’ve invested in developing our Intellectual Property and most importantly our user community will offset industry needs tremendously. Contracting with Oracle in this manner leverages our time advantage. Focusing on the IP and user community aspects of this project will be a better use of our time, resources and skills. It is also where we see value in the software business. It is consistent with our belief that specialization and the division of labor will need to be applied to all aspects of the economy. By doing so we can do a better, more productive job.

If directors believe these ERP developments can be done within their organization, why haven’t they happened? Our scope of application development in the Preliminary Specification would be considered equal to what each and every producer would need to undertake. This is if they choose to continue going it alone in the unshared cost model. The main difference is scale. To acquire just the depth of understanding and detail necessary of the Oracle ERP Cloud offerings would require the same costs replicated across the industry in each and every one of the producer firms, assuming producers had a timely, oil & gas, workable, profitable business model. I could read things differently in terms of producer investors and bankers' timing and expectations. 2015 was when investors expressed their discontent with the industry at large. They identified lack of performance, accountability and transparency as issues at that time. I would never have assumed that a decade of inaction was a tolerable amount of time.

I should state here that the bulk of this RFP is a derivative of the one I wrote specifically “To the Board of Directors, Our RFP Response…” in late June and July of 2021. I raise this point as after 18 years this blog receives a high distribution across the North American producer population. Yet not one phone call or any other method of communication was used by any producer at that time to contact People, Ideas & Objects. Producers continue to declare us persona non grata.

I personally have worked on ERP systems in the oil and gas industry for thirty two years. Our first attempt in 1991 failed in 1997. This initiative began in 2003 and has been unsuccessful to date. There are few ERP providers available today and nothing else specifically designed for oil & gas from a Tier 1 provider. The benefit of this latest initiative is that copyright law is now upheld in all marketplaces and I’ve secured what I've developed. My point is to suggest that oil & gas companies have mistreated oil & gas ERP systems vendors in the three decades I’ve been involved. Much as it has mistreated the service industry, its investors and bankers. The need to financially support these initiatives from oil & gas sales revenues is now a result of this mistreatment. Producers must realize this reality. Just as there are no oil & gas producer investors, there are no investors interested in anything associated with oil & gas ERP systems. This is until these producer issues are resolved. 

To the point of Intellectual Property. It is the basis of all software. No software vendor will violate another's Intellectual Property. SAP or any other reputable company would adhere to those principles as that is the basis of their firm's value. It is detrimental to violate others' IP. Therefore the producers will be left to develop their own systems and may, or may not adhere to respecting the Preliminary Specification and People, Ideas & Objects Intellectual Property. That would be their choice and we would transition from an operational software company to one where our IP is respected. On the other hand, the producers could come up with their own methods of ERP software development and fight it out among themselves as to who owns what. This is after the money necessary to fund all those developments has been spent. The IT resources consumed in the process are sent on to their next industry with all the other service industry resources to find gainful employment elsewhere. It should be noted, as I have said, that accounting and administration are not distinct competitive advantages for producer firms. 

Although I feel highly productive today, that will not be the case in thirty years. Who’s coming into the field with the scope and scale of opportunities presented in the marketplace that these producer bureaucrats have created? What Intellectual Property will those that enter in thirty years bring, and conversely after consideration of People, Ideas & Objects et al, what IP can they bring? Producers may be surprised to learn that there are other dynamic and exciting industries right now. I can conclude that I am stuck with the consequences of my choices and can live without regrets about what I’ve done. I doubt those that follow me will feel the same after they’ve put in the three or more decades of effort necessary to generate that first penny of revenue from oil & gas producers. And that assumes People, Ideas & Objects reach that point. Producers today have no one to turn to for funding as its proven directors didn't care about their organization's profitability, or even oil & gas? It's clean energy!

Throughout our writings we have alleged that producers' accounting over the past four decades, and particularly the profitability reported, is specious. This is due to the phenomenon of “building balance sheets,” “putting cash in the ground,” overhead and other expenses that are not handled appropriately. Depleting cash chronically and raising serious governance issues that resonate throughout the investment community and elsewhere. This accounting allegation of ours is that the specious accounting methods conducted throughout the industry have been obscured through poor ERP systems that were deliberately created through producers' bureaucratic mismanagement. Governance over the quality of accounting and management systems has become an issue at the board of directors in recent years. Due to a direct request from their investment community. There are no tier 1 ERP systems providers selling oil & gas systems today and more importantly, outside of People, Ideas & Objects et al no interest. SAP sells to producers, but it is inadequate for oil & gas. How many producer issues are attributed to poor SAP systems? It has not been the case that producers have not been able to participate in the development of People, Ideas & Objects. 

A purpose-built oil & gas ERP system will need to be developed on a Tier one systems vendor platform to implement a governance model that satisfies the investment community. People, Ideas & Objects use Oracle Cloud ERP. The market leader in ERP systems according to Gartner. Based on our Preliminary Specification, our user community, and their service provider organizations we’ll provide a comprehensive and complete oil & gas solution in our Cloud Administration & Accounting for Oil & Gas software and service offering. One that provides a comprehensive value proposition in reducing producer overhead costs. Turning what remains of those costs into variable costs based on profitable production.

Competitive Advantages

We turn now to the three distinct competitive advantages of the People, Ideas & Objects offering. These consist of our user community, including their service provider organizations, research and Intellectual Property. These combine to form a sub-industry we’ll create between technology providers such as Oracle, oil & gas and the service industries. Each element of our competitive advantage contributes to our Cloud Administration & Accounting for Oil & Gas software and services. 

People, Ideas & Objects

In order to match our competitive strengths, we selected our user community, intellectual property, and research as our competitive advantages. 

Our User Community 

Quality in a product or service, like profitability, is difficult to achieve. Implementing a Tier 1 ERP system for an industry on a revolutionary, disintermediated basis is ambitious. A rebuilding of a dynamic, innovative, accountable and profitable North American, energy independent oil & gas industry is needed for the long term. We’re not trying to tear down the industry to rebuild it. This destruction has been done by the officers and directors of the producer firms. Delivering the Preliminary Specification to all producer classifications brings additional challenges not previously attempted in any industry. Now add quality. Can this be done? Not on the basis of the industry's current point of view, attitude or method of operation. Our failure rate would be 100% due to cultural inertia against our success. A 100% exhaustion rate and a high probability of systemic mental health difficulties for all concerned. It would leave the producers the viable scapegoat that they’re the only solution, all else failed. People, Ideas & Objects and our user community must secure our budget to ensure our independence from producers. Otherwise we’ll become producers “blind sleepwalking agents of whomever feeds us” to demonstrate that we failed and theirs was the only solution and opportunity.

The point needs to be made that oil & gas producers haven't satisfied today’s market needs. As with the Soviet Union's inability to feed its people, organizations eventually exhaust their ability to meet the demands of what they’re established for. The structured hierarchy can no longer operate effectively or efficiently enough to meet the needs of any aspect of the greater oil & gas economy. The producers, service industry, and critical resources of the financial, operational and political frameworks are all structurally and financially depleted. This is due to long term unaddressed issues created by producers' officers and directors. Our proposed method of rebuilding the greater oil & gas economy, brick by brick and stick by stick, is therefore the constructive approach. 

It is here that we can look to our user community for leadership in the business aspects of this rebuilding. People, Ideas & Objects have provided our user community with the power and control over this rebuilding process through our user community vision. There we find three distinct policies that enable them to instill the quality and leadership such an initiative requires. 

Therefore if anyone from industry needs or desires to have any aspect of the Preliminary Specification dealt with at any time. They will only need to speak with the appropriate member of our user community responsible for that area. Providing a resource for all those in the industry to have input and a say in what they need to do their jobs. A permanent resource, along with our software development capability to provide the changes and enhancements producers require and desire. This will enable producers to continue to achieve the dynamic, innovative, accountable and profitable objectives their investors set for the oil & gas producers.

I’m only briefly introducing our user community's competitive advantages. There is a section directly below detailing and describing their specific attributes and how they’re applied.

Intellectual Property

We’ve covered this area fairly extensively in the Organizational Construct section of this RFP document. Intellectual Property forms the basis of our strategic and operational approach to the industry. We do not see Intellectual Property being as much of a legal construct as it is the political and cultural foundation of how the western economy and its civilization now operate. With software dominating industries, or having the potential to do so, the underlying value and protection of this intangible asset class is held in the Intellectual Property that software is derived from. This western cultural economy involves law-abiding citizens who uphold software companies' rights. This is especially the case with software companies where other firms' Intellectual Property is carefully managed and only used in contractual agreements. Intellectual Property is best described in what we describe… 

It's no longer enough to own an oil & gas asset. It's also necessary to have access to ERP software that makes the oil & gas asset profitable.

While we operated in the 1990s this was not the case. Intellectual Property was more like the wild west in terms of whoever had the largest arsenal had the largest opportunity. Intellectual Property development and respect in the 21st century, particularly in the software industry, has been necessary and dramatic. Innovation, intellectual development, and leveraging of our economy have been needed to provide the much-needed leverage to our economy. Much as mechanical leverage benefited society in the 20th century. 

We will continue to apply our Intellectual Property in the manner we have. It is our desire and we are pursuing the opportunity to resolve the issues in oil & gas as an operational software and service related sub-industry through our Cloud Administration & Accounting for Oil & Gas. North American producers' actions are highly consequential. We see the industry making a decided move towards SAP’s ERP offering as it is the only other Tier 1 ERP offering on the market. Producers may do so to satisfy their investors. If this scenario continues, this would preclude People, Ideas, & Objects from remaining an operational software organization for many years. 

Research

Our capacity and capabilities in the area of research into oil & gas administration & accounting are of value to the industry. The issues we identified in our May 2004 publication and resolved in the Preliminary Specification in August 2012 have now become the primary concerns of the industry. As we suspected and were concerned at that time, if the issues the industry faced remained unaddressed, they would lead to an existential crisis for the industry. With devastating fallout consequences for society due to the mechanical leverage of up to 25,000 man hours derived from each barrel of oil. Officers and directors run their firms in their own interests. Having no regard for their fiduciary responsibilities and the broader responsibility of running a profitable company. 

It should be noted that we were ridiculed by these individuals who said profits don’t matter. Profits always matter. Running a profitable business is fundamentally different from taking investors' money and spending it. It is difficult and challenging. It takes skill, courage and fortitude to achieve, persevere and lead. None of the characteristics or culture of what we’ve seen from those who claim profits don't matter. They’d “muddle through.”

I’ll also note that today the consequences of running a profitable operation are not within the domain of understanding or the culture of the oil & gas industry. The litany of excuses, blaming, viable scapegoats, “muddle through,” “put cash in the ground,” and other nonsense permeates the culture. A culture that fails to meet market expectations of its needs. Maybe not today, Europe is our warning, but we’re headed in that direction. Running a profitable operation is the only unlimited source of capital. Limited only by one's imagination which answers why we’re in this existential crisis. If the organization pursued profitability everywhere and always, they would meet investor demands and have the financial resources to fulfill market opportunities. If the industry wants to do this or that, if this is the direction they want to move to then a profitable operation will provide them with the opportunity to pursue those areas. If the proposed investments fail, they will suffer severe consequences of diminished profitability and difficulty moving forward with their next initiative. Such are profitability's perils. There are far more capital resources available to those running a truly profitable operation than any investor class. This fact is either lost in the cultural malaise, conveniently ignored through bureaucrat mismanagement or they're just busy coming up with more excuses. 

My frustration is that this societal mess we find ourselves in was unnecessary and avoidable through the adoption of the Preliminary Specification in August 2012. People, Ideas & Objects provide a mid- to long-term solution to marketplace problems. Those that had the responsibility and authority to act and deal with this appropriately did nothing but fight this initiative with underhanded, cheap tactics. It is not that they did not fully comprehend the issue or the solution that People, Ideas & Objects promote. If they didn’t understand the issue or our solution why would they have undertaken these tactics towards People, Ideas & Objects? 

Based on our research today, we found the following. Society lacks time in this fast-paced world. To satisfy the personal concerns of the chosen few officers and directors at the cost of their fiduciary duties. This is done by fulfilling one's roles, responsibilities, authority and accountability. People, Ideas & Objects' concern is that we're well behind on the time necessary to turn this around. Seven years before we can do so. Which may be more time than our issues allow. And in that seven year time frame the development and implementation of the Preliminary Specification is a small fraction of the total work and effort needed across the entire North American oil & gas industry.

Our User Community & Their Service Provider Organizations

People, Ideas & Objects primary focus and priority is on our user community. They are the means by which we can ensure a quality Cloud Administration & Accounting for Oil & Gas ERP system is delivered to North American oil & gas producers. Our objective is to ensure that we provide the most profitable means of oil & gas operations, everywhere and always. 

Our user community and service provider organizations have the following competitive advantages. This is a fundamentally different basis of competition and one that adds significant value to the producer firm. This value is provided throughout the entire oil & gas economic structure. Approaching producers' overhead costs in a systemic and analytical manner and breaking down the individual processes into standardized, objective methods provides the industry with the overall value proposition of the Preliminary Specification. Each individual user community member will work with our development team defining, designing, developing and implementing their understanding and the input of producers into derivative software products based on the Preliminary Specification. Building out the Tier 1 ERP system necessary for North American producers. Our user community members are the principal individuals of their service provider organizations that operate the accounting or administration process on behalf of the industry. 

What will not be found in our user community is price-based competition. Service providers set their own prices for their services. And receive exclusive licenses to manage their specific processes. All human endeavors are motivated by self interest and our user community and service providers are no different. In the end, their self-interest can be achieved if they ensure that oil & gas producers are provided with the most profitable means of oil & gas operations, everywhere and always. And not worry about other service providers offering comparable services based on price. Where this comparable firm did none of the heavy lifting in terms of determining “how and what” was needed, and will continue to be needed, to provide oil & gas producers with the most profitable means of oil & gas operations. The competitive basis of our user community enables them to get their heads in the game and fight to ensure producers are profitable everywhere and always. This is done by using their distinct competitive advantages.

Our Cloud Administration & Accounting for Oil & Gas service has changed the structure of producer overhead, making fixed overhead costs variable. Variable based on profitable production. Overhead costs are therefore recovered in the current period. The cash incurred to fund producers overhead will be paid by the consumer and returned within the current business cycle. Replacing the present twenty-year process of capitalizing overhead and using depletion to recapture these costs. Creating producers' heavy reliance on investors for cash. It is these competitive advantages that provide substantial value to the producer firm. Getting to the root of value generation requires deep analysis and complex work. It would be difficult to achieve this in an environment where price-based competition was the main concern for our user communities and their service provider organizations.

The following classifications will be used by our user community for competition. These will be the basis of a shared understanding between our user community. This understanding determines how one user member leveraged specialization to enhance productivity in their process by using this method or that, etc. When we factor in the time and sense of urgency at which this product must come to market, this will be highly appropriate. This sharing will be collaborative and competitive. Seeking a performance and quality product for the long term. This is the effective way our user community and service providers have been configured. 

I want to mention the updated direction Oracle is taking in their products and services. What was discussed in their 2022 CloudWorld Conference regarding the developments they were undertaking has a direct impact and benefit to the oil & gas producers that will use our Cloud Administration & Accounting for Oil & Gas software and service. They are introducing higher level process automation by partnering with banks and shipping companies, etc. In the example provided, it is their agreement with J. P. Morgan Chase that attracted our attention. By integrating credit card processing into Oracle Cloud ERP at a high level. Oracle Cloud ERP software allows employees to designate their credit card charges to the account and project the expense belongs to. Then Oracle will evaluate the charge to ensure it falls within the customer companies policies and if so process the charge. The employee will have no further expense reports to complete, their immediate supervisor will have no further expense reports to review etc. In addition, they will have all of the follow-through normally conducted on firm expense reporting. Saving untold thousands of hours per year in the process. 

This sharing of software development and integration of the process with various partners is wholly consistent with the work we do on People, Ideas & Objects. The benefit to the oil & gas producer is that they will gain these advantages for oil & gas attributes through us and our user community. But they will also gain Oracle's generic business benefits. Software development and integration for the J. P. Morgan Chase process will be expensive. Where the costs are allocated across Oracle's entire customer base. However it will also be a distinct competitive advantage that Oracle provides its customers. These developments will be iterative and continuous as are the People, Ideas & Objects permanent user community and software development capabilities. 

The last point refers to our user community and their service provider organizations' competitive advantages. And describes the distinct automation, specialization and division of labor between computers and this community. Computers excel at processing and storing data and information. People on the other hand have the distinct advantages listed below. This is a unique perspective on today’s oil & gas producers' ERP systems implementation.

Accounting & Administration Expertise

Well trained and experienced in their fields, our user community members provide administrative and accounting expertise as their primary value add to the process. This applies to their service provider organizations. Our Cloud Administration & Accounting for Oil & Gas service is a sub-industry between the oil & gas industry and technology. Filling a gap between the two as we feel they’re not communicating effectively. 

Analysis of Conflict & Contradictions as Analytical Tools

Conflict and contradiction indicate the issue's source. Analysis of these two factors will reveal alternative solutions. When we apply these to the business world, behaviors, communication methods and other factors can provide insight and understanding into an issue and its resolution. These are part of the more advanced style of tools that will be needed to resolve the many exceedingly large issues the industry and our user community will encounter. 

Application of AI & ML

Artificial Intelligence is overrated in the marketplace at this time. AI is a module in the Preliminary Specification where we establish effective and efficient AI algorithms from our user community. These algorithms can be shared and are shareable across the industry through Cloud Administration & Accounting for Oil & Gas. Offsetting the inordinate cost of each producer involved in the difficult business process of developing, testing and proving AI algorithms. 

Machine learning is a far more effective tool that will be valuable to our user community due to their unique perspectives on industry data. They will manage the entire industry's data through individual processes. This data set would be interesting to analyze from the point of view of its unknown unknowns. 

Automation

Automation will be used to ensure that the most effective and efficient operations are provided to producers participating in these developments. Relieving administrative and accounting resources to pursue higher level, value added opportunities. Reduction of costs in this sense is worthwhile, not just from a cost reduction perspective. Reduction of costs implies high automation levels. Automation does not just reduce costs directly it does so indirectly through error reduction. Error reduction reduces time. What admittedly is becoming a more critical resource as we enter the 21st century. Through People, Ideas and Objects, producer firms would benefit from these competitive attributes in both the oil & gas domains. And in the generic business domain through Oracle Cloud ERP. 

Collaboration

As I noted earlier a collaborative, collegial environment would be the basis of the competitive environment between our user community and their service provider organizations. The basis of collaboration and cooperation is the importance of the work they're undertaking and their critical role in rebuilding the oil & gas industry.

Compromising

Finding the solution in a world of difficult and complex issues requires creative solutions that meet the needs of those parties. Although we are rebuilding brick by brick and stick by stick there are established industry methods, regulations and processes that need to be adopted. We need to find creative ways of implementing and organizing them under the Preliminary Specification. This demands that our user community members offer industry solutions that work for all concerned. 

Creativity & Design

Some may struggle to imagine creativity in administration and accounting. However there is nothing that will be more critical in the discovery, testing and implementation of effective and innovative procedures that provide value to the oil & gas industry. We published the Preliminary Specification in August 2012 and soon after, in March 2014 began the development of our user community. As a result people within the larger oil & gas industry have had the model in the form of the Preliminary Specification and our user community vision in their minds for more than a decade. Understanding what their involvement could be, should they decide to join our user community based on the principles set out in these documents. Assuring that they are prepared directly and indirectly for the development and implementation phase. It is here that People, Ideas & Objects have work to break down the motivational and behavioral paradoxes. And introduce radical cognitive dissonance. 

Creative Destruction, Spontaneity & Serendipity

Each of these established economic principles has been eliminated from the 21st century business landscape through software development. It is the unchanging methods and procedures that software defines in organizations, especially ERP systems, that lock organizations into unchanging and unchangeable situations. Creating the bureaucratic nirvana we experience across the economy today. People, Ideas & Objects have shown through our user community and service providers that they can make the effective changes necessary to ERP systems. These changes will be derivative of the Preliminary Specification. Establishing a permanent user community and software development capability is necessary for businesses to evolve throughout the 21st century. 

Explicit and Tacit Knowledge

Providing software in the marketplace is a small part of the solution today. Software captures explicit knowledge and codifies it within software processes management. It is the service associated with that software where the value is derived. A service offering such as our Cloud Administration & Accounting for Oil & Gas must include tacit knowledge. Software and services must be able to make the changes necessary to accommodate the accelerated pace of change in today’s market, and what we can only assume will be the case tomorrow. The leadership and independence of our user community ensures producers remain on the optimal business model. This ensures producers continue to have the most profitable means of oil & gas operations, everywhere and always.

Ideas

The uniquely human element that will be in demand. An idea that generates a dollar today will produce a nickel tomorrow. The need to have exponential volumes of ideas will be a demand of the future in everything we do. How these are captured and implemented in software and services will be necessary. And with the shared and shareable model these ideas, once proven, tested and appropriately implemented will be leveraged throughout the industry. Building and leveraging value for everyone. 

Innovation

People, Ideas & Objects at al’s Preliminary Specification our user community and their service provider organizations are structured around innovation. Our research into the Preliminary Specification determined that innovation is a defined and replicable organizational process. These have been incorporated throughout the sub-industry we're building. Importantly our user community and their service providers can affect the changes needed to facilitate innovation in efficient and effective ways through the design of the producer organization. Our Preliminary Specification is structured on the Organizational Construct of innovation. To ensure producers fulfill their dual role of profitability everywhere and always, while providing abundant, affordable and reliable energy.

Integration / Implementation

Integration or implementation falls under the responsibility of our user community and their service provider organizations. These are the critical components and the final steps in ensuring the quality of software and services we’ll provide. Integration begins on day one of development in terms of planning and preparation. Our user community members will ensure that their service providers are appropriately implementing process management. As the principal owner of the service providers they’ll be duly authorized and the responsible parties, therefore motivated appropriately. 

Issue Identification & Resolution

“Muddling through” is over. There can be no more ignoring oil & gas issues. People, Ideas & Objects provide the tools, methods and Organizational Constructs to address and resolve issues. We see that software seals organizations in concrete. Which is commendable from a governance perspective, however it must be innovative and capable of change to achieve the high level performance trajectory of a dynamic, innovative, accountable and profitable organization in the 21 century. This will be an order of magnitude more difficult than what the oil & gas culture is currently familiar with. As difficult as the industry situation appears today. Consider how simple it was only a decade or two ago. What will it be like in a decade regarding the issues and opportunities these firms face? To be as unprepared as we are today, for what is unquestionably the most challenging future the industry has ever faced, is dangerous. 

Judgment

Computers do not have a distinct competitive advantage in judgment. A uniquely human characteristic that will be the basis of understanding for the remainder of this century and as long as we choose to. Oil & gas is valued in the consumer marketplace purely on cost. Unfortunately, not for its risk of shortage or the potential impact on civilization. Setting the proper landscape for a dedicated environment in which oil & gas can prosper and conduct its business operations. What is our judgment regarding current producer organizations' capability and capacity to realize these opportunities?

Leadership 

I expect that our user community will provide the leadership necessary for the administration and accounting of North American oil & gas producers. The expectation of how and why the industry earns its profits, along with the development and evolution of its business model. To provide the industry with the tools it needs to evolve at the capacity and speed necessary to meet its future demands, the greater oil & gas economy needs an objective and standard basis for evaluating that. 

Negotiating

Negotiation and compromise in response to the interactions between producers and our user community will occur frequently. Compromises and negotiations on the Preliminary Specification however cannot and will not occur. The business model is integrated and heavily dependent on it functioning together. Changes at the Preliminary Specification level may have implications unknown in other areas of the system. If these changes are necessary, they can be analyzed and corrected based on the most comprehensive understanding, once developed.

Observation 

Since everything always turns out as planned there are no unexpected consequences. This may have been the case in prehistoric times. When unintended consequences do occur they can be invisible and fall into the category of unknown unknowns. Awareness of these possibilities needs to be at the forefront of our user community and service provider organizations. This is to ensure that errors and omissions are not manifested as difficulties. As complex as it is today, there may be increased difficulties due to the speed and complexity of what needs to be done. 

Planning

Planning in a dynamic environment is a futile activity at times. It however communicates to participants the information necessary to begin the process. It is the first step. 

Quality

Define it, clarify it, communicate it and ensure its implementation. It used to be driving downtown to work in the morning, and returning at night. 2 - 3 cars were broken down on a 15 mile trip. Japan exploited this opportunity to enter the North American auto market. They introduced reliability. As the cloud computing era secures a software and service operating environment, software is experiencing increasing reliability. Phones are far more sophisticated than people realize due to Steve Jobs starting in the mid 1980s when he was fired from Apple. And Sun Microsystems with its first commercial release of Java in 1994. Cloud Administration & Accounting for Oil & Gas, standardization, objective accounting and other methods will provide higher reliability on top of these technologies. A duly authorized and capable user community can do so much more. 

Research

Primary research has become abundant in the 21st century. We can choose to stand on the shoulders of giants, or recreate it again if we like. The amount of primary research unused at this point is probably larger than what has been implemented. There is rich ground here for value generation for those that can leverage these ideas into reality in oil & gas. In light of all the competitive advantages listed under our user community, putting research under their domain is a natural fit. We see this as highly complementary to the research People, Ideas & Objects lists as their competitive advantages. 

Specialization & the Division of Labor

We’ve covered this extensively in all areas of this RFP Response. It has been the source of all realized economic value generation since 1776. However, software disables this natural development process of “gap-filling” when it has no capacity for change, and the organization has a vested interest in the status quo. Producers have relied on “cost cutting” in field operations to generate value for decades and have nothing to show for it but a fundamentally destroyed service industry. Specialization & the division of labor in terms of the development of our user community and their service providers will continue to be a priority. And they will introduce the same understanding throughout the greater oil & gas economy.

Thinking

The contrast between “doing” and “thinking” may grow more significant as we proceed through the 21st century. Writing is thinking. In today's world, organizations' ability to provide basic functions, such as oil & gas, is at risk. More may not resolve the issue. Getting ahead of the game may be a thing of the past and a luxury we can tell our grandchildren about. The environment we're working in today requires testing hypotheses based on various scenarios of possible outcomes. Determine what is right based on what generates value for the firm. An environment where what an individual gets out of it depends on their generated value.

Recommendation

The Issue

The world has begun to understand and appreciate oil & gas's value. With 10 - 25 thousand man hours of equivalent labor in each barrel. Our global consumption level is 28 to 71 times the population's physical capabilities. To replace that in this century would be ambitious. What we can do, what we must do, and what we should have been doing all along is not waste one drop of these resources. This is done by ensuring they’re produced profitably, everywhere and always. Which ensures that we’re responsibly using these oil & gas resources and leaving future generations with proof that we did. This is done by passing on a viable, financially strong industry to manage that resource and an abundant, affordable and reliable resource itself?

Why would we produce oil & gas unprofitably?

What we know today is that none of the North American oil & gas produced in the past four decades has generated one cent in profitability at any time. It was a process of taking investor money to “build balance sheets” and “put cash in the ground.” Words spoken throughout the industry as if they had actual meaning. A misguided and deluded group of officers and directors that have been self-dealing for so long they know no difference. They have failed comprehensively in their role of generating profits for their shareholders. Now their organizations are likely to fail to meet consumers' long-term energy demands. Officers and directors who when faced with the challenge of making shale formations, or any part of their business, commercial decided to walk away. They pursued the green pastures of "clean" and unaccountable energy. August 2023 shows what was discussed at People, Ideas & Objects for decades is now the state of affairs. During the first half of 2023 the service industry's rig fleet lost 90 rigs. Natural gas volumes continue to grow despite depressed natural gas market prices. Producers will use "strict capital discipline" to resolve the issue. As has been repeatedly stated over the past decades. The only method of production discipline that will resolve natural gas and oil price issues is the decentralized production model of the Preliminary Specification. Which turns producer overhead from fixed to variable. Enabling the Joint Operating Committees to shut-in any unprofitable production and incur a null operation. Allowing the producer to realize maximized profitability when only profitable properties are produced.

These are not People, Ideas & Objects issues and we certainly did everything we could to mitigate these disasters we’re about to experience. They are not our responsibility as we chose to address the issue and were ostracized and vilified for it. Which if the officers and directors of the producers take note, did not deter us from doing our jobs. If someone suggests that People, Ideas & Objects et al Preliminary Specification is only “vaporware” they’d be correct. They’d also state the obvious fact that officers and directors have killed off a viable threat to their existence. An existence that has proven to be wholly unproductive and damaging to all concerned, and most particularly society in general. Our battle with these bureaucrats since the May 2004 publication of the Preliminary Research Report has been shameful. In light of the consequences for industry from this inaction, I repeat, not a single penny has been received from them towards the development of any aspect of this work. We've only received abuse like repeated beatings with baseball bats in the alley behind the dumpster. And now, with the desperate issues Industry faces, with no preparation or capacity to deal with them, what we’re seeing is what we’ve always seen “muddle through.” After eight years of their investors' refusal to continue being the “mark,” all we see in response from the officers and directors to their investors is that they’ll “muddle through.” Not one change in any method of their management.

People, Ideas & Objects recognizes the high upfront cost and makeup of our development and implementation budget. Our budget is based on 5,000 man years of effort. The issue we’re resolving is comprehensive and we’ve discussed both the necessity of the Preliminary Specification and its cost. Officers and directors' concern about these high costs is moot when the value wasted since its publication in August 2012 is tragic. These costs may have been considered opportunity costs, however the fact that these costs have now been incurred annually for decades and led to such evident destruction proves they were anything but opportunity costs. Saving a few pennies by not funding the Preliminary Specification is compared to the trillions of dollars of value they've destroyed since its 2012 publication.

Management of risk in business is a skill and it takes industry knowledge and understanding to mitigate it. Officers and directors of the producer firms are alleged to be motivated by such objectives yet have done little to deal with the associated risk of the oil & gas business. As far as hedging oil & gas commodities is concerned, our sample of producers represents approximately one third of Canadian and American production profiles. Reported hedging losses of $34.2 billion during a five-quarter period starting with the December 31, 2021 quarter. Therefore we can assume this would represent over $100 billion in losses for the broader population of producers. Such is the skill of officers and directors of producer firms. The arguments regarding our budget are specious and self-serving in light of the consequences experienced today and the time constraints officers and directors have imposed on themselves.

The selection of the Preliminary Specification may be seen as the producers' first step in reclaiming their integrity in the eyes of their investors. There would be incremental value beyond our defined value proposition in doing so. As the value differential in terms of the cash flow multiple vs. the market capitalization of our sample of 18 producers representing 11.52 million boe / day is $220.2 billion, which is potentially triple the number for the North American producers. It may be that the capital market predicts a decline in oil & gas producer firms. However, is the fact that this differential is consistent across many quarters more valid? Producers are among the most active traders on these firms' markets. In fiscal year 2022 $35.7 billion in share buybacks were conducted by our sample of producers. Without these share buybacks how understated are these differentials? To assume that producers will act on management issues reflects my naive optimism. The reality is officers and directors will “muddle through.”

What if the following scenario occurred? Producer officers and directors ceased to be subject to commodity price swings and learned to build value everywhere and always. This was done through the implementation of the Preliminary Specification. 

My argument is this: the development budget of the Preliminary Specification is a slight after taste in terms of the annual scale of revenue and profit losses, hedging and market valuation losses that officers and directors feel are acceptable. We certainly don’t hear any concern about these issues. We have a highly advanced society today that has many complex and difficult issues and opportunities. When points of view such as the Preliminary Specification are offered in 2012 should they not be looked at objectively and evaluated on the basis of their potential to mitigate risk in the long run? Or maybe even before then, such as our Preliminary Research Report in May 2004. We have a similar situation captured in a Winston Churchill quote that addresses the point.

Want of foresight, unwillingness to act when action would be simple and effective, lack of clear thinking, confusion of counsel until the emergency comes, until self-preservation strikes its jarring gong - these are the features which constitute the endless repetition of history

Therefore the issue is the officers and directors of the producer firms who have personally benefited at the expense of all others associated with oil & gas. Officers and directors were responsible for ensuring none of this happened, had the authority to deal with it and the resources to correct it. They recently wandered into unrelated industries and businesses only to find oil & gas revenues weren't as available as they assumed. Unable to provide a viable solution to their difficulties. It was stated that shale would never be commercially viable. In order to rebuild the industry from the disaster producer officers and directors created. Oil & gas revenues will be needed by investors, employees, and the service industry. To add insult to injury, the one action they will take after eight years of not listening to their investors is they'll implement SAP instead of People, Ideas & Objects to ensure they won’t have to be held accountable for this damage and destruction, and no one will find any of the skeletons they’ve hidden in their closets.

Accounting for the Damage & Destruction

There is no doubt that many in oil & gas don't fully appreciate what I'm discussing when I talk about damage and destruction. Officers and directors do and they’ve clearly understood since the publication in May 2004 of our Preliminary Research Report. They’ve always seen it as a threat and know they would not personally benefit from its disintermediation and high accountability levels. We can all agree that the “endless repetition of history” is what we’ve been faced with for centuries in so many situations. As a society, we no longer accept those viable scapegoats. Today people are waking up to the folly of green energy and the imminent environmental Armageddon's entry into its seventh decade. Oil & gas is nothing like oxygen to the body. It’s analogous to blood that allows everything to function. 

Here is People, Ideas & Objects' recommendation for North American producers. Select the Preliminary Specification as the industry standard ERP system. Bold, audacious and justified on the following basis. Today producers may feel they’re sailing on for a good run and do not have to concern themselves with the past. What is evident in their financial statements is that there are legacy damages and difficulties ahead. The greatest problem I can see is the lack of trust, faith and integrity the capital market holds for producer firms. Cash flows are poor compared to the capitalization accumulated in property, plant and equipment. They barely support the “lofty” valuations producers feel they earned through their obstinate “muddle through” strategy. Comparing today’s performance to the past four decades doesn’t impress. It is important to note, however, that even these valuations aren't believed, and North American producers trade at half those prices. This performance needs to be put in the context of the past two decades' environment. Interest rates have never demanded competition among management. Yet, Treasurys would have been a far better investment over the same period.

The handful of producers that can perform at the level of their cash flow multiples should participate in the development of the Preliminary Specification. Those that are not performing will be desperate for revenue and put their entire production profile on the market. As proven thousands of times before, this will continue despite the implications for commodity prices. It might be wise to remember the negative $40 prices of April 2020 for which no single producer was responsible. The Preliminary Specification recognizes that the Joint Operating Committee and the integration of producers within the partnership will enhance collaboration and innovation. Having partners in their Joint Operating Committees operational on the same standard, objective basis through the Preliminary Specification will be beneficial.

Investors of these producer firms need to know that the only acceptable solution for them is People, Ideas & Objects, our user community and their service provider organizations. Operational through our Cloud Administration & Accounting for Oil & Gas software and service which includes Oracle Cloud ERP. Selection of SAP or any other ERP system should not be an option. This needs to be communicated in the same manner that the prior request for a Tier 1 ERP system was made. Otherwise there is much to lose for all concerned.

We’re kidding ourselves to think officers and directors will act contrary to their “muddle through” behavior. It has become a culturally systemic method of operation. There is no easier way to understand this than to assess the situation in terms of where the industries stand today. All of these points are the result of decades of mistreatment and abuse of their power, authority, accountability and responsibility. This is for personal financial gain. The cumulative symptoms and attributes that have led to the damage and destruction People, Ideas & Objects rant about include…

In all of this there has been no response from oil & gas producers. From our initial Preliminary Research Report in May 2004, until the investors' strike began in 2015, nothing has been done. Producers and directors need to acknowledge that it is within their domain to deal with issues. Profitability is an issue. The solution is in front of them in the form of our Preliminary Specification. There will be no one helping them from now on. Adopting the Preliminary Specification, profitability would provide all the money they need to do as they please in the business. Do they need $800 billion to build LNG facilities in Canada? Make that money. The means are on the table. If they want to do anything in North American oil & gas, the only thing stopping them is their own obstinance. Build a profitable business and the world will be their oyster. I’ll explain it explicitly. Make oil & gas profitable if officers and directors want green dreams. And do so with accountability everywhere and always.

But no, they’ll outlast investors who officers and directors believe will return begging to get in. I mentioned that oil & gas ERP systems were abandoned by our investor class in the 1990s. This was due to our inability to perform financially because we could not convince producers to manage their business properly back then. Unaccountability was and is their business, or am I redundant here? If we assume that the Preliminary Specification et al is the appropriate solution. If we assume that the value proposition is as it's stated, it would be reasonable to believe that ERP investors would smash down my door. Two things stop this. 1) I won’t accept their money because I am unaware of how I can make money in this business without the producer buy-in that this RFP solicits. 2) ERP investors are not here. They know what the situation is and based on their 1990s experience, they left. Nothing has changed and they remain where they are. 

Producers need to understand that they’ll never attract investors or banks until they change their firms' performance trajectory. There are no signs of that, only their obstinate and stubborn “muddle through” strategy that destroyed everything and continues to do so.

These are the issues People, Ideas & Objects addressed in our Preliminary Research Report in May 2004. And became the basis of our research that led to the Preliminary Specifications publication in August 2012. An interesting quotation from Mark P. Mills of the Manhattan Institute applies directly to oil & gas history.

Brookfield’s CEO said that the strategy follows the same deal-making common in other capital-intensive industries. Companies will happily take any supplemental money, but the market opportunity, not the subsidies, underpins such big investment gambles. The key, to use the famous truism from Walter Wriston (the former, storied CEO of Citibank), is that “capital will always go where it’s welcome and stay where it’s well treated. Capital is not just money. It’s also talent and ideas.”

Put this into the context of developments in North American oil & gas. Culturally, producer officers and directors believed investors became organizational subsidies. Not the means to pursue the market opportunity. 

To deal with this today requires only one solution and that is People, Ideas & Objects et al. This is defined in this RFP response. What this also proves is common knowledge that “organizations don’t change, people do.” The resistance to change that we’ve experienced, and that of the producers' investors, has originated in one area of each and every North American producer, officers and directors. Our final attempt to deal with them was sending an offer to the officers and directors in July 2021 which they ignored. This Response to a Request for a Proposal is highly derivative of the proposal sent to them. This proposal is not directed at them and therefore, no harm no foul, my abuse is inert. 

We are directing this RFP Response at those investors who have seen enough to know the situation today is not being addressed effectively. People, Ideas & Objects don’t need to tear things down to start over. That’s already been done. We need to rebuild the industry in the vision of the Preliminary Specification. In order to accomplish that, investors must direct producers' officers and directors to fund the Preliminary Specification. What will happen to North American oil & gas if this doesn’t happen? It involves a short-to-mid-term semi-permanent status quo. Or as long as SAP is around.