A key to the resolution of the industries ability to find and produce the energy the market demands is through the efficient application of capital. This point has been dealt with in the Financial Marketplace™ module and other modules in this specification. Raising money requires access to public funds. The size of the innovative oil and gas producer should not be an impediment or constraint of access to the markets of oil and gas activity, and, capital access. If a firm is a small partner in a few projects, their ability to raise capital will be dependent upon their level of compliance capability.
Preamble/
By way of a scenario, I want to show how I see the Compliance & Governance™ Module providing value to the oil and gas producer. Firstly it is necessary to understand the context of how the industry may evolve. The value that is added in the oil and gas business is through the application of the earth science and engineering disciplines. To a large extent the CEO’s and COO’s of the industry are derived from those disciplines, and many may have been able to start large independent producer companies. How these large independents began and prospered are in a way how I see the industry evolving, however, to a much larger scale. If a geologist or engineer had a specific idea for a property, and saw that the property was available for sale. He or she should be able to purchase an interest in that property and implement the idea for his / her own benefit. Now we have discussed the Petroleum Lease Marketplace™ Module and its ability to create a marketplace for leases. And the Financial Marketplace™ Module and how the capital invested in the industry could be more specific to a property and hence provide enhanced access to capital. The Compliance & Governance™ Module provides a framework for the producer with the capability to maintain the operation consistent with the regulations and requirements that are a critical part of the access to capital. And the complexity of the royalty and tax regimes and the internal policies of the producer. A tall order for any firm.
Compliance to the royalty regulations, (Alberta's) tax policies, and SEC requirements of the geographic location of the property is necessary. Consistent with the software’s offering of compliance, there would be many People that would use the software to ensure compliance. Accountants, auditors and others are working within the various modules and interfaces of the People, Ideas & Objects™ application. Providing producers with the ability to assure their firms activities are in compliance with capital markets requirements. Implementing these compliance frameworks is through the Accounting Voucher™ Modules transaction analysis toolkit.
The Compliance & Governance™ Module would handle any of the current independents, National Oil Companies (NOC’s) and International Oil Companies (IOC’s) as well and as easily as the small producer firm. Tax, Royalty and Exchange Commissions are just as important, and applicable, to the operations in the Gulf of Mexico as they are to the small producer with 10 bbls / day. The key should be that all sizes of producers should have access to the frameworks they need to maintain their compliance. And particularly in the manner that addresses the industries systemic use of the Joint Operating Committee. Otherwise the inability for some producers to maintain compliance in this automated fashion would be a limitation to the industries ability to conduct operations.
Compliance being the sole reason of the bureaucracy today, the needs of the SEC and accounting for Sarbanes Oxley have driven the organizations into making the organization all about compliance, in my opinion. The business of the business has been lost as a result. Companies have become reporting entities that have lost sight of what the energy business is. Compliance is a necessary part of any organization and this module will allow producers of all sizes to maintain their status is in compliance of the regulations. A key differential is that the compliance is a fallout of the process of doing the business.
SEC Chairman Christopher Cox has introduced and developed a system that will mirror the company’s compliance. This compliance framework will be built with the Governance mentioned elsewhere in this specification, and the financial, legal, operational decision making, communication and cultural frameworks of the JOC. Providing alignment of the six frameworks of an oil and gas producer into one software application.
Under the Governance module we need to approach the use of the scarce human resources in a more holistic manner. All member firms of a Joint Operating Committee should provide resources that are designated to specific properties. The concept of an operator can not last if we are to independently build and replicate capabilities within each firm. The role of the Market has to provide some elements of these capabilities. Many of the accounting and land procedures will need to be amended to achieve this pooling of resources within the member firms of the Joint Operating Committee. How does a group of people committed to a JOC participate and recognize the order and structure of the people employed there.
I have proposed a solution for this by implementing an element of Military Command & Control structure. Where people are designated at a certain level within their profession and like a Captain in the U.S. Army may find themselves reporting to a British Major with a variety of other NATO forces under his command. The effective pooling of all JOC participants resources can then enable the structure to be deployed, and each individuals role and responsibilities assigned appropriately. The costing and associated issues are part of the Partnership Accounting™ Module noted elsewhere in this specification. I believe this is also one of the critical means of addressing the National Petroleum Council's dual problems of the shortage and retirement of the industry brain trust.
Compliance to the royalty regulations, (Alberta's) tax policies, and SEC requirements of the geographic location of the property is necessary. Consistent with the software’s offering of compliance, there would be many People that would use the software to ensure compliance. Accountants, auditors and others are working within the various modules and interfaces of the People, Ideas & Objects™ application. Providing producers with the ability to assure their firms activities are in compliance with capital markets requirements. Implementing these compliance frameworks is through the Accounting Voucher™ Modules transaction analysis toolkit.
The Compliance & Governance™ Module would handle any of the current independents, National Oil Companies (NOC’s) and International Oil Companies (IOC’s) as well and as easily as the small producer firm. Tax, Royalty and Exchange Commissions are just as important, and applicable, to the operations in the Gulf of Mexico as they are to the small producer with 10 bbls / day. The key should be that all sizes of producers should have access to the frameworks they need to maintain their compliance. And particularly in the manner that addresses the industries systemic use of the Joint Operating Committee. Otherwise the inability for some producers to maintain compliance in this automated fashion would be a limitation to the industries ability to conduct operations.
Compliance being the sole reason of the bureaucracy today, the needs of the SEC and accounting for Sarbanes Oxley have driven the organizations into making the organization all about compliance, in my opinion. The business of the business has been lost as a result. Companies have become reporting entities that have lost sight of what the energy business is. Compliance is a necessary part of any organization and this module will allow producers of all sizes to maintain their status is in compliance of the regulations. A key differential is that the compliance is a fallout of the process of doing the business.
SEC Chairman Christopher Cox has introduced and developed a system that will mirror the company’s compliance. This compliance framework will be built with the Governance mentioned elsewhere in this specification, and the financial, legal, operational decision making, communication and cultural frameworks of the JOC. Providing alignment of the six frameworks of an oil and gas producer into one software application.
Under the Governance module we need to approach the use of the scarce human resources in a more holistic manner. All member firms of a Joint Operating Committee should provide resources that are designated to specific properties. The concept of an operator can not last if we are to independently build and replicate capabilities within each firm. The role of the Market has to provide some elements of these capabilities. Many of the accounting and land procedures will need to be amended to achieve this pooling of resources within the member firms of the Joint Operating Committee. How does a group of people committed to a JOC participate and recognize the order and structure of the people employed there.
I have proposed a solution for this by implementing an element of Military Command & Control structure. Where people are designated at a certain level within their profession and like a Captain in the U.S. Army may find themselves reporting to a British Major with a variety of other NATO forces under his command. The effective pooling of all JOC participants resources can then enable the structure to be deployed, and each individuals role and responsibilities assigned appropriately. The costing and associated issues are part of the Partnership Accounting™ Module noted elsewhere in this specification. I believe this is also one of the critical means of addressing the National Petroleum Council's dual problems of the shortage and retirement of the industry brain trust.
Compliance & Governanc Module Draft - Specification
We run the risk of becoming too technical in this specification and as such lose the business perspective of this module. Therefore a brief summary of the technology will be provided as a precursor to how the application will operate.
“Here comes XBRL;” a Harvard Business Review Breakthrough Idea article notes SEC's Chairman Christopher Cox's initiative to use the XBRL reporting language. This is directly in line with what I had written on this blog back in May 2006. The XBRL technology will be truly revolutionary, just as the Harvard Business Review notes.
"All this undoubtedly sounds too good to be true to managers who are rightfully jaded after decades of false promises that the next IT silver bullet is (this time, really!) just around the corner. So what makes XBRL different? Unlike all past technological developments, it doesn’t come in a wide variety of proprietary flavors, like ERP systems, operating systems, and customer relationship management strategiessystems, to name just a few. XBRL is an open-source standard that was developed by an international public consortium of nearly 500 organizations from 27 countries, including companies, investors, analysts, auditors, regulators, and aggregators of financial data, such as Standard & Poor’s. (For more background, see www.xbrl.org, the standard’s official Website.)"
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