SF report for Q1 2014

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Back to Johnny West

What did you make?

BP mapping

Chris Taggart of OpenCorporates suggested over dinner in London that "someone" should map BP to show the value of using public filings. Because other players in the field are sniffing around developing corporate mapping, and we would like to take and maintain thought leadership on the question of how to create open data systems for this, I decided that we would take it on as soon as possible. We assembled a team of four people to pull down BP's filings and go through them building up a picture of its subsidiary structures. We allocated three to four weeks to do this but on day 8 we got lucky and found a comprehensive list of affiliates which was scrapable buried in BP's 2013 Annual Returns statement to UK Companies House. We were able to compare this against a 2010 document which was not scrapable but did show full internal hierarchy of affiliate structure up to 14 layers deep. The result is a raw data set which numbers 1,180 companies in 84 jurisdictions going 12 layers deep. It is currently in a primitive Google visualisation but we are working on creating fully open source interfaces which offer granular and usable access to the data.

Uganda second model

We created a second version of the financial model of Uganda's oil contracts with Tullow plc, an Anglo-Irish company. This was to replace a first version that had been made before the Shuttleworth Foundation began on the basis of the IMF FARI system of modeling extractive contracts for the UK campaigning group Global Witness. There was some question that the original might infringe copyright by using techniques that were too close to FARI and so when GW asked to be indemnified against that, I considered the best option was for the new modeling team to undertake to model it from scratch. Disappointingly, GW then delayed using either version of the model and in the meantime Revenue Watch Institute published an extensive analysis of exactly the same contracts (though not the model itself, which remains the basis of innovation within the open modeling contract). This means they are unlikely to go forward with the Uganda project now and we will have to move to another country to build the open source approach.

Ghana first model

We created a first model of Ghana's oil contract with Kosmos Ltd, a US oil company, but it was not ready for full circulation before the modeling project lead Don Hubert went on a four-month break. He will be back at the end of August and we will revisit then.

Endocode: proto-program to write models

A lengthy debate between Don and myself led us to decide to see if it was possible to approach the financial modeling component inductively as opposed to deductively. That is to say, could we standardise the way that contractual terms and fiscal regimes could be written such that they could be fed to an actual program which would produce the model rather than handing it over to a petroleum economist to craft a model by hand. I had intermittently discussed this with a Berlin software company called Endocode founded by Mirko Boehm, an open source programmer who is also committed to studying open economics. We held a long conference call on April 24th and decided to trial the approach.

In early May, we decided that a way to test the viability of a software program would be to take three different oil contracts (mining contracts are sufficiently different that they should be left to a stage 2), and to extract simply five fiscal terms from each "Three by Five". Then create a standardised entry mechanism via a web page which would feed these terms through to a program written in Java which then outputs the results to a spreadsheet via CSV. Endocode accomplished this against the tight deadline of May 26 (it had originally been my intention to demonstrate this at the SF meeting in Budapest) for 3,500 euros. The plan is then to iterate: if we are seeing satisfactory results, we could aim to deepen the modeling of the same three contracts to 15 terms each "Three by Fifteen".

Training material on beneficial ownership

We were invited to lead a workshop for Nigeria's EITI implementing agency on the two issues of beneficial ownership and contract transparency. This gave us the opportunity to build a 6 hour training around beneficial ownership, the issues of corruption and tax evasion which are the target goals of corporate mapping. Although the course was compiled with Nigeria-specific case studies (tracing corporate chains of local and international companies operating in Nigeria) its overall structure is generic, and it can easily be adapted. Among knowledge gains: the technical definition of beneficial ownership is not commonly understood (NEITI for example has built a BO pilot relating only to legal entities, which strictly speaking is not BO at all); public expectations are tremendously high (Nigerians want this new element of EITI to catch "all the bad guys" and yet the implementation by NEITI of its pilot is so modest in scope that it will fall far short of this).

Live demo of corporate mapping

On May 6 we gave a presentation to Re:Publica in Berlin on mapping BP. In order to do this we prepared some easy data sets which would demonstrate the principle of the Open Corporates namespace architecture and how it can uniquely identify any company in the world using the TLD and in-country incorporation identifier. The presentation can run from 50 to 90 minutes. It is the same one which I used for the Dogfood session in Budapest.

"Roadshow" of OO open data applications

OO Associate Anton Rühling had spent three months trying to create interest in Tunisia for OpenOil data applications (starting as an unpaid volunteer). Finally, the Tunis office of the Heinrich Böll Foundation responded by organising a day for us to expose open data applications to an interested group of Tunisian civil society. This allowed us to extend our series of presentations (in Prezi) beyond contract modelling to corporate mapping and geo-spatial mapping.

The presentation is a highly economic way of demonstrating the general scope of the different applications - in one day, a group of uninitiated people can get a taste of how modeling, power mapping, geo-mapping and the wikis look from the outside, and play around with them a little on the inside.

Where did you go?

Qatar (Jan 28-29)

A one day detour on the way to southern Africa to visit a friend (Paul Eedle) who has just resigned from a senior position at Al Jazeera International. We discussed the possibility to approach Jazeera with services related to corporate mapping for their investigative units.

South Africa (Jan 30 - Feb 6)

I attended the Mining Indaba, Africa's largest mining conference, to check on the state of information freely available in and around the mining industry (since OpenOil has more experience and information around oil and gas but we are conceptually committed with Gaiabase to covering all extractive industries). I got a clear vision of the differences in information flows and dynamics with mining: the engagement with communities on the ground is so much more extensive than with many oil industries and therefore issues of engagement and informed consent and what can go wrong (such as Marikana) more pervasive. And the industry is more fragmented, with less consortia between companies. Plus, the mining companies are trying harder to make a case for their industry in terms of economic development but with arguments that are poor in evidence, and not independently verified. But the trip did not yield specific project opportunities.

Mozambique (Feb 7-14)

I spent a week working with a CSO called the Centro de Integridade Publica (CIP) on advancing local understanding of oil contracts. We held a two day workshop mostly for civil society but with some participation from second tier government officials such as the Auditor-General's office on how to create a framework to monitor gas contracts held by Eni and Anadarko offshore and Rio Tinto and Vale for mining coal inland. I also talked extensively with CIP adviser Don Hubert on possibilities to create an open modeling component, which turned into the pitch subsequently made in early March.

Norway (March 17-19)

I attended the board meeting of the Extractive Industries Transparency Initiative in Oslo as a guest presenter on mining contracts and economics.

London (April 9-10)

Held a series of meetings with: Adam Smith International (development consultants, on the potential to use modeling and corporate mapping as part of ASI's offerings to governments and civil society; two political risk companies (FTI Consulting and Control Risks) on open data corporate mapping techniques, which resulted in us picking up a "shadow" contract for FTI Consulting; Chris Taggart at Open Corporates on ongoing work in Nigeria, where he suggested mapping BP; Omidyar Network (Martin Tisne) on potential long-term funding; and gave a presentation on investigations in extractive industries to a journalism workshop held by the Tax Justice Network.

Tunis (April 11-12)

Tested out a road show of OpenOil's four open data applications at a meeting convened by the Heinrich Böll Foundation's office in Tunis, together with the Revenue Watch Institute. About 40 attendees included domain experts, transparency and digital activists including al-Khatt. This led to an invitation by RWI to submit an application piloting corporate mapping and modeling in Libya and Tunisia.

Paris (May 16)

Meetings with Altai International, a development consultancy, on working together to present open modeling and corporate mapping to their government clients (Afghanistan and South Sudan); and Oxfam France on the potential to map Areva, the French state-owned power company who are screwing a tough deal out of the government of Niger for uranium mining.

Nigeria (May 19-21)

Held a workshop for Nigeria's EITI implementation on the issue of beneficial ownership (who controls companies through what structures) and how to publish extractive contracts. About 30 attendees included representatives from Nigeria's state institutions, CSOs such as Publish What You Pay, the NEITI secretariat and companies who sit on Nigeria's NEITI board. We developed a 6 hour training around the issue of beneficial ownership which is the theoretical basis to support our work in corporate mapping.

Hungary (May 21-16)

SF meeting. Nuff said.

What have you been talking about?

Power Mapping Principles

We have been working hard on messaging around an open data approach to corporate mapping. Because although it seems paradoxical, there have been many initiatives to map corporate webs and put results into the public space, there has been relatively little impulse to develop common methodologies leading to interchangeable data. From the beginning, we have been using and extending the OpenCorporates methodology of identifying companies, and also of verification. As the quarter progressed this has turned into a number of rules of thumb.

  • OO as service provider, not cool investigator: If we want to lead the evolution of a standard to pool public domain data derived from investigations, it would be helped considerably if OpenOil itself does not pursue any in-depth investigations. This is a little tantalising for the team (and especially for me!) but I think the chances of gaining the confidence of investigative journalist and campaigning outfits will be greater if we become known for serving up sexy story leads much more than doing them ourselves. We may have to from time to time seed potential approaches by writing up some early stage investigations (so for example with BP discussing project level economics and Sunbury Secretaries Limited) but we will retreat as soon as we can to being the boring service provider. This brings with it a couple of other working principles:
  • Using only public domain data: Because we want to build communities, including in very sensitive places, who can work directly on corporate mapping, we have made a strategic decision to only work with data which is broadly in the public domain. This quarter, for example, as before, we have passed on leaked documents that have come into our possession to other organisations following the investigative modus operandi. We already have a Nigerian colleague working on extending the Nigeria map: we make a rough equivalence between punitive UK libel laws and physical safety in the Niger Delta. If you won't get sued for it in London, you are unlikely to be killed for it in the Niger Delta.
  • Verification: never more than a click away from source: Another part of this methodology then involves linking every node and edge in a corporate power network to its source document at one click. This is a harder interface to build and one we are working on right now. This serves the safety principle: we are not making original assertions (in the same way as Wikipedia has the "no original research" principle). It is also designed to maximise practical use of the networks: an investigator can establish in seconds the verification of any connections between any nodes in the network.
  • BP and the Socrates Principle: Having succeeded in a comprehensive mapping of BP we have come to the conclusion that it tells us very little about BP. Like Socrates, we have expended a vast amount of effort to attain the knowledge that we know nothing. A slight dramatisation but it sets up for the reveal: what we have done is build an open data fully accessible structure into which anyone can put any real knowledge they do acquire about BP and its 1200 entities. It also sets up a very necessary Stage 2 of the BP project. If the corporate structures are the bare bones of a multinational, we need to try and "put flesh" on them by a couple of digs into other information sets within the company filings which can perhaps be mined by someone with domain knowledge.
  • Breaking up the investigation chain: All of this also involves persuading the existing community of people who do investigations for public purpose that the open data approach is workable because most investigations can be broken into two stages: the public domain quotient, and that part which remains confidential to each institution. If we can develop trust and understanding,m we can build towards contributions of the public domain quotient into a common pool and everybody wins.

Open financial modeling and data

Similarly, we have been developing messaging around open financial modeling: that it is technically possible now.

  • "You don't know what you've got til you model it": The transparency initiative has succeeded in gaining acceptance of the principle of access to data but failed in transforming that information into a system-level understanding of the way the world's oil, gas and mining industries work. We believe that financial modeling is as close to the "killer app" in terms of understanding the upstream as it is possible to get. Don came up with this phrase to encapsulate that all information short of a level where you can actually build a model is just dust in the wind.
  • "There is God, Exxon, and everybody else": A big part of the hesitation around engaging in financial modeling of these complex projects is the idea that other people have so much of an advantage in terms of access to data and insights. In fact, this is far from the case. Just last week I spoke to an IMF expert who described how on missions she sits up late to look for company reports on websites to try and feed in some intelligent estimates on costs to the models the IMF hands over to government. We seek to encapsulate this with the axiom: God, Exxon and everybody else. All models are intelligent guesswork and the margin of error depends on a combination of the soundness of the methodology and the quality of input data. But in this last respect what is not often realised is that the biggest determinant of future revenue streams is future price (beyond human power); the next biggest are a detailed mastery of all the cost data which usually only the multinational company ("Exxon" in this axiom) possesses (In theory governments have right of inspection of documents and audits but they rarely exercise these rights and have very variable capacity to evaluate their results). All other aspects of data are either more guessable with public domain data (such as production) or less "material" in the sense that they affect the end results less (have less of a margin of error). So everyone other than God (or other culturally appropriate representation of omniscience) and Exxon are on the same level when it comes to modeling. In other words, many parties with sufficient care and attention can get into the same ballpark as the IMF, or a mega-consultancy that wants $5,000 a day, or most government agencies, and so on.
  • the Chinese whisper effect of the closed model: The World Bank is asked to create a financial model for Project X in Optimistan. As is usual, it makes a number of assumptions: production will be this much, price will be that much, future exploration will make these new discoveries (or not). These are all different scenarios in the same model. The Bank hands the model over to the minister's aide. The minister is very excited about the possibility that he is going to preside over an explosion of $$$ coming into his benighted country and tells his aide to give him all the scenarios. Being Optimistan, he veers straight to the rosiest scenario. But couldn't it be even rosier, he asked his aide? You know, if the new find turned out to be an "elephant"? The aide dutifully adjusts one or two of the parameters up beyond the World Bank inputs. Soon the model is showing a magnificent result: this small oilfield is going to earn the country $300 million a year! Meanwhile, a more sober-minded approach suggests Optimistan might earn $80 million a year from that field if it is lucky. The Chinese Whisper effect is a direct result of the model itself being closed. Both the World Bank and the minister have published summaries of its findings. But without access to the model which shows precisely which revenue flows attach to precisely which assumptions, each assumption effectively operates as a "person" Chinese whispering in the ring of assumptions that make up the forecast as a whole, distorting the results in margins of error that compound each other... unknown to the public. it is important to realise that in the example above in Optimistan it is not in any sense necessary to assume that anyone has acted in anything other than the best public spirit.
  • Is Your Complexity Material? or, the anti-expert expert: Experts enjoy complexity in their domain - it is what makes them experts. But an "unreconstructed" expert is not necessarily the best placed to be able to optimise complexity for each given context, or even to acknowledge the principle that there is an optimal level of complexity which could be different in each case, relative to intended purpose. For instance, the degree of complexity you would need to model Internal Rates of Return, hurdle rates, Expected Monetary Value and a host of other considerations to make recommendations to a multinational company team during negotiations with a country is bound to be different to the level of complexity you might need if you had decided, for example, to explain the contract, once signed and delivered, to middle level civil servants in a number of ministries and geek-minded journalists and activists. Since models have never been published they exist in the expert-to-expert space. But we need to evolve models in the expert-to-curious-smartperson space. Assume 30 minutes with a college graduate who is numerate enough to navigate their way round Excel but little to no oil sector domain expertise - what level of complexity would be material to that use case? The confusion about the appropriate role of expertise can be compounded by listening to two experts debate. They naturally focus on areas of difference in perspective and position - it's more intersting. That can sometimes mislead the bystander, particularly if the debate is happening in an "authority impregnated" atmosphere, since they are unable to evaluate how "material" differences of emphasis or even of outright disagreement are compared to the areas of consensus. All models for public use should have a declared use case and level of complexity - imagine for example a model which explicitly lists terms which are NOT modeled because they are deemed immaterial. Note that with an open model it becomes possible to build on someone's work while disagreeing with them - you just add in the excluded terms, or adjust cost structures to your own inputs and estimates.

Who is joining your thinking?

Collaborations Begun

  • NACGOND in Nigeria: Our colleague Jude there has been working on the Nigerian mapping application since early April. Amrit spent four days with him at his office in Port Harcourt at the end of May, running through the techniques and current technical platform behind corporate mapping. We hope Jude will work on the Nigeria map with us at least through the end of 2014, as the first example of mapping techniques adopted by civil society in-country.
  • al-Khatt (Tunisia): An ICT NGO set up in 2013, working on a range of digital activism issues. We ran through the open data applications and included them as partners for a proposal to the Revenue Watch Institute (now renamed the Natural Resource Governance Institute NRGI) to work in the Arab World.
  • Open Corporates: Extensive collaboration is ongoing on corporate mapping for Nigeria and now with BP.
  • NRGI: NRGI asked us to produce a summary analysis of the state of extractive industries in Tunisia. They asked us to bid on a 12-month project to work on financial modeling, corporate mapping, geo-spatial and wikis in Libya and Tunisia and we submitted on May 31st. Waiting to hear final outcome but it looks promising.
  • Heinrich Böll Foundation: the foundation of the German Green Party took up a project strand which has emerged from the modeling - Unextractable Carbon, or what would happen to revenue flows to governments and societies which depend on hydrocarbons if some form of carbon pricing reduced the profits returning back to them? We reviewed possible country-specific models and approaches to this with the Böll team for Nigeria in Abuja in late May.
  • ASI: Adam Smith International is a large development consultant based in London. They have turnover of some 40 million GBP and approached OpenOil to join as a consortium partner for a large bid to work with the government and civil society in Ghana on tracking revenue flows and corporate webs. The bid will be submitted in June.
  • GIZ: Mozambique: Following the February workshop with CIP, the German development agency have asked OpenOil to spend a week with Mozambique's Auditor-General office in September to help them review their first audit of the state ministries and agencies involved in the hydrocarbon sector. This is important because offshore gas in Mozambique dwarfs any other project the country has ever had in terms of both the claimed revenues that will come from it in years to come, and the multibillion dollar costs which international companies are submitting now for repayment when production comes on stream.

Collaborations Contemplated

  • IMCO Mexico: IMCO is a well respected think tank in Mexico City whose director Juan Pardinas testified to the Mexican Senate on the governance aspects of the oil industry early in 2014 when Mexico changed its constitution to allow international companies back in for the first time since 1938. Juan has asked OpenOil to begin a training program for Mexican civil society around financial models in November 2014.
  • Open Society Foundation: The OSF Information Program in Budapest has invited OO to apply for funds to track use and impact of the corporate mapping in Nigeria. This could be an ideal opportunity to figure out how to integrate social network analysis and a range of digital tools into a baseline study. For example, how much are the big Nigerian companies and businessmen now discussed in the Nigerian blogosphere. This would also combine some actual ethnography in the field. A rare chance to properly develop "market research" around the social constituencies for the corporate mapping. Of course Nigeria will have its own specificities, but if we can understand which parts of the mapping work best, and which don't, for specific constituencies, some of it can be ported to other country level deployments of corporate mapping.
  • Omidyar Foundation: Promising general conversation about backing ran into a temporary blip when they decided we were too small for their funding range. But some small project may be established as a trust builder.
  • ACEP Ghana: ACEP is a think tank in Ghana that has high profile around Ghana's nascent oil industry and is run by Mohammed Adam Amin, a scholar at international level. They have requested a preliminary mapping of international companies around Ghana's energy sector.
  • ContentMine: Various discussions with PMR and the ContentMine on how to scrape PDF image docs, and other techniques to be applied to larger data sets around BP and corporate mapping as it goes forward.
  • Hypothes.is: Three people on the OO team have used hypothes.is - we would like to integrate it into the corporate maps themselves (which we are designing to that each node and edge is its own URL, in part to faciliate that integration), and also a tour of particular extractive contracts. Discussion ongoing with DW, particular interest around the expected release with the group functionality, which would then allow OO to host source documents but encourage a range of others to add their own group layers.
  • OpenCounsel: Discussed with AR at Budapest the possibility of working out legal protection issues around coming publications.
  • Tax Justice Network:

What was your biggest win over the past 3 months - and what did you learn from it?

The BP mapping - to be completed.

What was your biggest loss over the past 3 month - and what did you learn from it?

No single big screw up but three middle sized ones... to be completed.

  • the Global Witness modeling for Uganda
  • using the crowd in the wrong way in BP
  • a disastrous meeting with the Norwegians

What is the shape of your team?

  • Amrit Naresh: Researcher on Nigerian mapping, Amrit has been with OO since it started - but will shortly be heading to grad school at Tufts. He has concentrated on developing the wikis and the first stage of the corporate mapping. American.
  • Anton Rühling: Program associate, joined in January 2013 (after a short-term assignment to Egypt in 2012). Now leading the corporate mapping on BP, and how to take that component forward more broadly. German.
  • Don Hubert: Project lead, open modeling. Don has an illustrious career as a Canadian diplomat and professor behind him but has just finished spending two years in Mozambique. Don will lead the modeling project when he returns from driving across Africa for four months with his family in late August. Canadian.
  • Sandy Singh: A recent graduate of Dundee University's MA in Petroleum Economics, has worked on fiscal analysis of contractual regimes in Uganda, Ghana and Afghanistan on the modeling project.
  • Jude I: Trained as an engineer, a researcher based in Port Harcourt in the heart of the Niger Delta, seat of Nigeria's oil industry. Jude has started pulling company records from CAC, Nigeria's corporate registry, and discovering contracting relationships between companies active in the Delta. Nigerian
  • Lindsey Allwright: An Overseas Development Institute fellow working in Mozambique's Ministry of Finance, she has built the Excel models for Uganda.

Key Outsource Partners

  • Endocode (Mirko Boehm): Endocode wrote under extreme time pressure a first iteration of a super simple model to test the proposition that financial models for the extractives upstream could be automatically generated. Endocode is an open source software house based in Berlin.
  • iiLab (Jun Matsushita): iiLab and Jun has advised on technology options to develop an open source and more stable environment in which to run corporate mapping.

What are the metrics you are tracking yourself against - and where are you?

To be completed.