Evaluating Open Oil’s Financial Modeling of Guyana’s 2016 PSA – 4

Responding to Open Oil

Today’s column addresses the third part of my three-part evaluation of Open Oil’s financial modeling of Guyana’s 2016 PSA. It provides responses to the alleged inaccuracies contained in the first column, and identified in a letter by the Author of the modeling exercise. I do not usually respond to such allegations especially where a careful reading of the column is enough for readers to assess. I make an exception here, because the letter may be seeking to restrain discussion, which would be unbefitting for an advocate of openness.

The inaccuracies cited include: 1) “Open Oil did not develop the FAST standard” 2) Open Oil is an incorporated German Company, and not an NGO 3) the claim that it offers “unique specialized training” is inaccurate 4) the claims it “offers its services for sale as an equal opportunity consulting group is a phrase it has not used”; and 5) “the model is focused on Liza I as the first field” is inaccurate. And, finally, 6) the claim the model uses the “February long-term forecast price by the EIA” is inaccurate.

Alleged Inaccuracy 1

Dr. West states: “the FAST standard is in wide use … Open Oil did not develop the FAST standard …it is simply one of hundreds of companies … who use it, some 60 of whom are signatories to the standard”.

My column stated, “Fast Standard” [is] Open Oil’s acronym for its financial modeling of the hydrocarbons sector”. I never claimed the FAST Standard was solely and/or exclusively developed by Open Oil. I did however claim, this was the generic model Open Oil “employed in the exercise for Guyana’s 2016 PSA”.  I leave readers to judge the extent of any inaccuracy.

Alleged Inaccuracy 2

Dr. West states “Open Oil is not an NGO, but an incorporated German Company”

Under the header “Background” I stated “The author of the study … is both the Head and Founder of Open Oil. This organization is perhaps the most well-known, as well as perhaps the most celebrated in this field among non-governmental bodies (NGO) and developing and emerging economies worldwide”. There is no claim made here that Open Oil is an NGO! Remarkable!

Mr. West went on to claim, “Open Oil is a company incorporated in Germany.” True, but this “company” is no ordinary one. It is incorporated as a “social enterprise.” To avoid explaining what that is to my local readership I felt the description given above advertised Open Oil’s iconic status. Indeed, under the same header, I speak about its “Mission”.

Alleged Inaccuracy 3

Mr. West stated my claim Open Oil “offers unique specialized training” is inaccurate as “we have made no such claim”. Further, “that Open Oil offers its services for sale as an equal opportunity business and consulting group”, is also inaccurate as “we have not used such a phrase”. 

This description of Open Oil as a “business and consulting group” would seem to contradict the alleged inaccuracy of calling Open Oil “an NGO”! However, that apart, I have not claimed the description of Open Oil that I presented is theirs. It is mine. And, I stand by it. I am entitled to as I am not a hired publicist for Open Oil.

As to the claim of “unique specialized training” I refer readers to the following descriptions of Open Oil, by Open Oil:

Its website, under the heading “About OpenOil” states:

“We offer training and consultancy services to governments, international organisations, businesses and NGOs and create mechanisms and processes for managing natural resources. Such services include big data curation and interpretation, (our search engine Aleph contains 3 million compliance documents from extractives companies), and financial analysis of large oil and mining projects, where we are currently working with several governments to institutionalise a financial modeling process, based on the FAST modeling standard.

Further, it states under the same header:

“Johnny is founder and director of OpenOil. He is a member of the Association of International Petroleum negotiators and member of the advisory board of the FAST Standard Organisation, the organisation that protects, promotes and furthers the development of the FAST Modelling Standard. Since 2013, he and OpenOil have pioneered the development of public financial models, leading debate in such techniques for organisation such as the World Bank and the IMF.

Johnny has extensive experience in providing financial analysis training to governments and civil society organisations, as well as generally around the management of extractive industries, including in and around the issue of beneficial ownership. He has consulted for the UNDP, the World Bank, the Centre for Global Development, GIZ, DfID, CABRI, the governments of Sierra Leone, Cote d’Ivoire, Somalia, Indonesia, Tunisia, and the Kurdish region of Iraq.”

Specifically on its relation to the FAST Modeling Standard, (Model Library) it states:

“This page contains a list of all models and narrative reports that have been built by OpenOil and partners, following OpenOil’s standardized open-source approach to financial modeling.

OpenOil has adopted the FAST standard of financial modeling to build a worldwide network of practitioners from civil society and government who can share tools, skills and experience, and collaborate to make financial modeling available to a wider set of stakeholders.”

I leave readers to evaluate both Open Oil’s description of its training and its working relation in regard the FAST Modeling Standard.

Alleged Inaccuracy 4

Mr. West claims my statement: “the model is focused on Liza 1 as the first field” is inaccurate. Here I quote from his Report: “The base case is modelled only (my emphasis) against Liza Phase 1 and a field size of 450 million barrels”.

Alleged Inaccuracy 5

Mr. West further claims my statement: “the price used is February’s long term forecast by the EIA” is inaccurate. Here again I quote from his Report: The Table Economic Parameters states: Forecast Price: EIA Reference Price to 2050, Feb 2018. The model does allow users to set their own Reference Price. He however, sets the February 2018 EIA Reference Price to 2050 for the base case. This is not my doing.

Alleged Inaccuracy 6

Mr. West also states: “Stabroek is the first oil field to be developed in Guyana”; and goes on to note: “The financial model and the accompanying narrative are based on that contract [2016 PSA] as well as public statements and media reports giving details of reserves, development lead time and costs”.

Conclusion

As I wrote this response I was astonished. I began to wonder, if as Owner of Open Oil, Mr. West may have too much of himself invested in, what has become, truly a “social enterprise,” and therefore, is taking observations on it as personal!

Next week, I wrap this up and begin my critique of the model.

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