OpenOil did not develop the FAST modeling standard

Dear Editor,

I am writing to correct some inaccuracies in a review by Dr Clive Thomas of our financial model of the Stabroek field in his column in the May 6th Sunday Stabroek:

He states that “Open Oil has developed its own financial model called the FAST Modeling Standard”. This is incorrect. OpenOil did not develop the FAST standard. We are simply one of hundreds of companies around the world who use it, some 60 of whom are signatories to the standard: The FAST standard is in wide use by investment banks, international financial institutions, and accounting firms.

He states that OpenOil is an NGO. This is incorrect. We are a company incorporated in Germany.

He states that we claim to offer “unique specialized training”. We have made no such claim. He states that OpenOil “offers its services for sale as an equal opportunity business and consulting group”. We have not used such a phrase.

He states that the model is focused on Liza 1 as the first field. This is incorrect. The model offers Liza I as one scenario, alongside two others, and in fact the financial analysis is based on reviewing a range of possible production profiles. The different production scenarios are operated simply by switching in a drop down list on the Dashboard.

He states that the price used is February’s long term forecast by the EIA.

This is incorrect. The EIA is one price scenario used. Another is to allow the user to input any price whatsoever and see the impact on profits, revenue flows and so on. This is an important point because no model should ever be based on one future price scenario, as future prices are so uncertain. Many of the key findings are those which have been spread across a range of possible price points.

We are happy that the newspaper, and Dr Thomas, are devoting time to discussing financial analysis. It is exactly in this spirit that we published the model in the first place. Our practise is that any empirically-based criticisms of the model which can improve it will be folded into an update, or subsequent version. Part of the methodology of public interest financial modelling is precisely the idea that once a full model is exposed to public scrutiny it can then be collectively improved.

The idea is that publication triggers a “virtuous circle” of improving public knowledge, so commentary like that of Dr Thomas is valuable and important.

Yours faithfully,

Johnny West


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