Mapping BP (3): Building a global network one affiliate at a time
The decision to try and map BP’s global network was based on the fact that the company makes many public filings. We didn’t really appreciate quite how many until we had finished.
In the UK jurisdiction alone, the BP network we constructed shows 182 affiliate companies. Of these, the 26 which were second tier companies made 157 filings in 2012 and 143 in 2011. The group probably then submits something in the region of 600 to 800 filings a year in the United Kingdom alone. Then we were able to access filings in probably a dozen other jurisdictions.
All in all, the BP group probably averages between 50 and 100 A4 pages of public disclosures per day to public authorities around the world, under normal conditions. That is, not counting investigations, legal proceedings, or any other event-driven process.
We didn’t know that when we started because we were at the start of the learning curve. So we signed up to the Companies House filings service, at a pound a time, and started pulling records.
We had come to the project ever so slightly armed with some ideas of where to look. Because of its profile, there are stacks of books about BP. We set ourselves a BP Primer out of three of them: Tom Bergin’s Spills and Spin, John Browne’s autobiography Beyond Business, clearly the founding declaration of the man to rehabilitate his reputation after his 2007 downfall, and the Evolution of a Corporate Idealist, by Christine Bader, mostly an account of her time at BP working on corporate social responsibility.
Through these we understood broad trends within the company in the past twenty years which we hoped to find traces of in the corporate hierarchies. Bergin, who had held the energy beat at Thomson Reuters for years and had huge experience and clearly great access, offered several major themes. Browne’s rampant acquisition strategy of the 1990s and all the Amoco and Castrol entities that must have adhered to the group. Since BP had moved aggressively into commodity trading suggested there should be prominent corporate investment and trading vehicles. As to individual theatres of operations, would there be any affiliates clearly linked to BP’s play with TNK in Russia, for example, or its expanded presence in Libya post rehabilitation of Muammar Gaddafi in 2004-5? Also, given that many of the vertically integrated companies seemed to manage retail operations in very atomised fashion, would we see companies that were essentially a group of petrol stations in Dorset, and another one for Cumbria?
We quickly found a huge variation of size and activity between one company and another. Some seemed not to have any turnover at all, while others, such as BP Exploration Company, reported a profit of 840 million pounds in 2012. So we began to identify which affiliates seemed to be the “monsters” – BP Global Investments, BP International, BP Holdings North America – and home in on them.
Each of these companies were showing direct subsidiaries in a list at the end of their annual accounts. So we began to build lists of these affiliates and, if they were in a jurisdiction we could reach online, to pull their filings too, to see if they in turn had any subsidiaries. As we found each new company, we recorded its jurisdiction of incorporation, full legal name and number of incorporation, and then stored all documents in directories which combined these into one string.
This was a key understanding from OpenCorporates – the need to identify individual company structures. Not “BP”, or “BP Global Investments” but “BP Global Investments Limited, incorporated in the UK on March 4th, 1932, company number 00263889”.
The entire play in the way multinationals operate is in the interplay between the group as a co-ordinated whole, making a decision about how to invest in exploration in the Arctic, how to react to the US shale gas boom, or how to allocate this year’s profits, on the one hand, and the fact that this unified strategy is played out across over a thousand affiliate companies who each exist as a separate legal “person”. The company naturally seeks to maximise advantage across jurisdictions by combining these different legal persons in the most profitable and least liable way for any given business problem. But even if the group does act with one mind, the price of being able to maintain the affiliate structure as separate legal persons is a bare minimum of autonomous reporting by each of them.
It was as if the BP group is a superorganism and its affiliates were the constituent organisms included in the whole, like individual ants or coral. None of those companies had any purpose or would even survive without being integrated into the colony. Nevertheless, each of them has a unique footprint and what we were doing was studying the traces of their uniqueness, their “genetic code”, to see if significant information was stored there which could tell us something about the internal functioning of the colony.
We kept tabs day by day on this grinding process of building the network by attrition. By the end of the first week we had found about 400 companies. That seemed like a lot of companies, although we knew from an earlier study that in 2010 BP was thought to have had about 1500 companies. So we thought, gosh, well since we understand which files to pull down and where to look within them, it might only take another two weeks, three weeks max.
The team was made up of smart people with no domain experience. Part necessity and part choice. The necessity was that we were on a tight budget and couldn’t afford people who had experience of corporate accounting, for example, or international tax structures, even if we could have persuaded them to stare at annual accounts until they went cross-eyed. The choice was, this was an ideal group for the proposition that anyone with some brains and determination to rub together could grok enough of the basics to build these corporate maps. As well as Anton Rühling and myself, who belong to OpenOil, Claire, Avner and Miguel were grad students based in Berlin. They were intrigued by the hypothesis, clearly had a solid basis of research skills and it didn’t harm that two of them came from countries where hydrocarbons were either already a major feature of the political economy (Venezuela) or might shortly be about to become one (Israel).
Then we had a couple of breakthroughs.