2011 ERP®

Examination
Study Guide
The designation for risk professionals
in the energy sector
 2011 Energy Risk Professional (ERP®) Examination Study Guide

INTRODUCTION ERP Examination Approach

The Study Guide sets forth primary and
secondary topics covering physical energy
assets, operations, and financial energy
markets; as well as the techniques used
to manage risk in each. New for 2011 is the
Current Issues in Energy Section. Recog-
nizing the dynamic nature of the energy
markets we added the current
Candidates are expected to issues section to familiarize
understand both physical ERP candidates with new
and financial energy sectors, developments and issues that
general and specific risk are likely to have a long-term
management concepts and impact on the global energy
approaches, and how they markets. The topics selected
are applied in the day-to-day in conjunction with the Energy
activities of an energy risk Oversight Committee (EOC)
professional. reflect those that practicing
energy risk professionals
should master. All topics are reviewed
annually to ensure the ERP Examination
remains timely and relevant.
The ERP Examination is a comprehensive,
practice oriented examination. Candidates
are expected to understand both physical
and financial energy sectors, general and
specific risk management concepts and
approaches, and how they are applied in
the day-to-day activities of an energy risk
professional. One should note that it is very
rare that an energy risk professional will be
faced with an issue that can immediately be
slotted into one category; in the real world,
an energy risk professional must be able to
identify any number of risk-related issues
and be able to manage them effectively.
Readings
Questions for the ERP Examination are
derived from the readings listed under
each topic. These readings were selected
in consultation with the EOC to provide a
base of knowledge and practical applica-
tion of the major topics and concepts
outlined in the study guide. It is strongly
suggested that candidates review all read-
ings prior to sitting for the examination.

Test Weights and Question Allocation for the 2011 ERP Examination
Physical Energy Markets
Petroleum 15% 27 questions
Gas 10% 18 questions
Electricity Production and Distribution 10% 18 questions
Renewables and Carbon Emissions 5% 9 questions
Section Total 40% 72 questions

Financial Markets
Financial Products and Valuation 20% 36 questions
Modeling and Valuing Energy Transactions 15% 27 questions
Risk Management Techniques 15% 27 questions
Section Total 50% 90 questions

Current Issues in Energy 10% 18 questions

Exam Total 100% 180 questions

© 2011 Global Association of Risk Professionals. All rights reserved. 1

2011 Energy Risk Professional (ERP®) Examination Study Guide

PHYSICAL ENERGY ASSETS—Exam Weight | 40%

• Petroleum
• Natural Gas
• Electricity
• Renewables and Carbon Emissions

NOTE: Many of the readings in the physical section cover physical risk management and mitigation techniques as part of daily
operation. Consequently there is no separate “risk management” section for physical energy assets.

Petroleum—27 Questions

1.1 Exploration and Production

1. Charles F. Conaway. The Petroleum Industry: A Nontechnical Guide (Tulsa, OK: PennWell Books, 1999).
• Chapter 2.......................Petroleum Origins and Accumulation
2. Institut Français du Petrolé Publications. Oil, Gas Exploration, and Production: Reserves, Costs, Contracts
(Paris: Editions Technip, 2007).
• Chapter 3.......................Hydrocarbon Reserves
3. Charlotte Wright & Rebecca Gallun. Fundamentals of Oil & Gas Accounting, 5th Edition (Tulsa, OK:
PennWell, 2008).
• Chapter 1........................Upstream Oil & Gas Operations

1.2 Crude Oil

1. Norman J. Hyne. Nontechnical Guide to Petroleum Geology, Exploration, Drilling, and Production, 2nd Edition
(Tulsa, OK: PennWell Books, 2001).
• Chapter 1........................Nature of Gas and Oil
(sections titled: “Petroleum, Chemical Composition, and Crude Oil”)
2. Thomas O. Miesner and William L. Leffler. Oil and Gas Pipelines in Nontechnical Language (Tulsa, OK: PennWell
Books, 2006).
• Chapter 1........................How Pipelines Differ
• Chapter 10 .....................Investment Decisions
• Chapter 12 .....................Engineering and Design—Storage
3. Samuel Van Vactor. Introduction to the Global Oil and Gas Business (Tulsa, OK: PennWell Books, 2010).
• Chapter 3.......................Oil Pricing
4. Purvin & Gertz, Inc. The Role of WTI as a Crude Oil Benchmark.
• Section Three...............The Role of WTI
Available online: http://www.purvingertz.com/userfiles/products/PurvinGertz_WTI_Benchmark_Study.pdf

2 © 2011 Global Association of Risk Professionals. All rights reserved.

 2011 Energy Risk Professional (ERP®) Examination Study Guide

1.3 Refined Petroleum Products

1. James H. Gary, Glenn E. Handwerk and Mark. J Kaiser. Petroleum Refining: Technology and Economics,
5th Edition (New York: CRC Press, 2007).
• Chapter 1........................Introduction (through section 1.8)
• Chapter 14.3..................Economics and Planning Applications
2. William L. Leffler. Petroleum Refining in Nontechnical Language, 3rd Edition (Tulsa, OK: PennWell, 2000).
• Chapter 20 ....................Simple and Complex Refineries

1.4 Synthetics
1. Michael Toman, Aimee E. Curtright, David S. Ortiz, Joel Darmstadter, Brian Shannon. Unconventional Fossil-
Based Fuels: Economic and Environmental Trade-Offs. (Santa Monica, CA: Rand, 2008).
Available online: http://www.rand.org/pubs/technical_reports/2008/RAND_TR580.pdf
• Chapter 4.......................Oil Sands and Synthetic Crude Oil
2. James T. Bartis, Frank A. Camm and David S. Ortiz. Producing Liquid Fuels from Coal: Prospects and Policy
Issues (Santa Monica, CA: Rand, 2008). Available online: http://www.rand.org/pubs/monographs/MG754
• Chapter 3.......................Coal-to-Liquids Technologies
• Chapter 6.......................Critical Policy Issues for Coal-to-Liquids Development

Natural Gas and LNG—18 Questions

2.1 Natural Gas

1. Davis W. Edwards. Energy Trading and Investing (New York: McGraw-Hill, 2010).
• Chapter 2.1.....................Natural Gas
2. Rebecca L. Busby. Natural Gas in Nontechnical Language (Tulsa, OK: PennWell Books, 1999).
• Chapter 8.......................Regulatory History of the Gas Industry
3. Arthur J. Kidnay and William R. Parrish. Fundamentals of Natural Gas Processing (Boca Raton, FL: Taylor
and Francis, 2006).
• Chapter 12 .....................Transportation and Storage
4 Frank Fabozzi (ed.): The Handbook of Commodity Investing (Hoboken, NJ: John Wiley & Sons, 2008).
• Chapter 36 ....................The Natural Gas Market in the United Kingdom

2.2 LNG
1. Department of Energy Publication: Liquefied Natural Gas: Understanding the Basic Facts.
Available online: http://fossil.energy.gov/programs/oilgas/publications/lng/LNG_primerupd.pdf
2. Michael D. Tusiani and Gordon Shearer. LNG: A Nontechnical Guide (Tulsa, OK: PennWell Books, 1999).
• Chapter 1........................The Liquefied Natural Gas Industry
• Chapter 3.......................The LNG Chain: The Project Nature of the LNG Business
• Chapter 11 ......................The Economics of an LNG Project

© 2011 Global Association of Risk Professionals. All rights reserved. 3

2011 Energy Risk Professional (ERP®) Examination Study Guide

Electricity Production and Distribution—18 Questions

3.1 Electric
1. Davis W. Edwards. Energy Trading and Investing (New York: McGraw-Hill, 2010).
• Chapter 2.2 ...................Electricity
2. Chris Harris. Electricity Markets: Pricing, Structures and Economics (West Sussex, England: John Wiley &
Sons, 2006).
• Chapter 6.......................Power Capacity
• Chapter 7 .......................Location
3. Sally Hunt. Making Competition Work in Electricity (New York: John Wiley & Sons, Inc., 2002).
• Chapter 2.......................The Essential Aspects of Electricity
• Chapter 8.......................Details of the Integrated Trading Model
4. Richard Baxter. Energy Storage: A Nontechnical Guide (Tulsa, OK: PennWell Books, 2006).
• Chapter 4.......................Applications

3.2 Coal
1. James T. Bartis, Frank A. Camm and David S. Ortiz. “Producing Liquid Fuels from Coal: Prospects and Policy
Issues” (Santa Monica, CA: Rand, 2008). Available online: http://www.rand.org/pubs/monographs/MG754
• Chapter 2.......................The Coal Resource Base

3.3 Nuclear and Hydroelectric

1. Roy L. Nersesian. Energy for the 21st Century: A Comprehensive Guide to Conventional and Alternative Sources
(Armonk, NY: M.E. Sharpe, Inc., 2007).
• Chapter 8.......................Nuclear and Hydropower
2. Ann Chambers. Renewable Energy in Nontechnical Language (Tulsa, OK: PennWell Books, 2006).
• Chapter 6.......................Hydroelectric

Renewables and Carbon Emissions—9 Questions

4.1 Renewables
1. Fisher Investments. Fisher Investments on Energy (Hoboken, NJ: John Wiley & Sons, 2009).
• Chapter 6.......................Alternative Energy
2. Roy L. Nersesian. Energy for the 21st Century: A Comprehensive Guide to Conventional and Alternative Sources
(Armonk, NY: M.E. Sharpe, Inc., 2007).
• Chapter 3.......................Biomass
• Chapter 9.......................Sustainable Energy

4.2 Carbon Finance and Emissions

1. Tom James and Peter Fusaro. Energy and Emissions Markets: Collision or Convergence? (Singapore. John Wiley
& Sons (Asia) Pte Ltd., 2006).
• Chapter 3.......................Green Trading Schemes
2. Frank Fabozzi (ed.): The Handbook of Commodity Investing (Hoboken, NJ: John Wiley & Sons, 2008).
• Chapter 37.....................Emissions Trading in the European Union

4 © 2011 Global Association of Risk Professionals. All rights reserved.

 2011 Energy Risk Professional (ERP®) Examination Study Guide

FINANCIAL MARKETS—Exam Weight | 50%

• Financial Products and Valuation

• Modeling and Valuing Energy Transactions
• Risk Management Techniques

Financial Products and Valuation—36 Questions

5.1 Commodity Forwards and Futures

1. Steven Errera and Stewart L. Brown. Fundamentals of Trading Energy Futures & Options, 2nd Edition
(Tulsa, OK: PennWell Books, 2002).
• Chapter 3.......................Behavior of Commodity Futures Prices
2. Robert McDonald. Derivatives Markets (Boston: Addison-Wesley, 2003).
• Chapter 6.......................Commodity Forwards and Futures
3. Frank Fabozzi (ed.): The Handbook of Commodity Investing (Hoboken, NJ: John Wiley & Sons, 2008).
• Chapter 5.......................Relationship Between Risk Premium and Convenience Yield Models

5.2 Energy Derivatives

1. Markus Burger, Bernhard Graeber, and Gero Schindlmayr. Managing Energy Risk: An Integrated View on Power
and Other Energy Markets (West Sussex, England: John Wiley & Sons, 2007).
• Chapter 2.......................Energy Derivatives
2. Vincent Kaminski (ed). Managing Energy Price Risk (London: Risk Books, 2004).
• Chapter 1........................Energy Swaps
• Chapter 2.......................Energy Options
• Chapter 3.......................Energy Exotic Options
3. Alexander Eydeland and Krzysztof Wolyniec. Energy and Power Risk Management: New Developments in
Modeling, Pricing, and Hedging (Hoboken, NJ: John Wiley & Sons, 2003).
• Chapter 8.......................Structured Products: Fuels and Other Commodities
4. Steven Errera and Stewart L. Brown. Fundamentals of Trading Energy Futures & Options, 2nd Edition
(Tulsa, OK: PennWell Books, 2002).
• Chapter 4.......................Speculation and Spread Trading
• Chapter 7 .......................Energy Options Strategies

5.3 Electricity Products

1. Vincent Kaminski (ed). Managing Energy Price Risk (London: Risk Books, 2004).
• Chapter 2.......................Energy Options
2. Davis W. Edwards. Energy Trading and Investing (New York: McGraw-Hill, 2010).
• Chapter 4.3 ...................Tolling Agreements
• Chapter 4.4...................Wheeling Power

5.4 Natural Gas Products

1. Fletcher J. Sturm. Trading Natural Gas: A Nontechnical Guide (Tulsa, OK: PennWell Books, 1997).
• Chapter 4.......................Hedging and Trading Instruments

© 2011 Global Association of Risk Professionals. All rights reserved. 5

2011 Energy Risk Professional (ERP®) Examination Study Guide

Modeling and Valuing Energy Transactions—27 Questions

6.1 Intro to Energy Modeling

1. Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition (New York: McGraw-Hill, 2007).
• Chapter 2.......................What Makes Energies So Different?
• Chapter 3.......................Modeling Principles and Market Behavior

6.2 Essential Statistics

1. Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition (New York: McGraw-Hill, 2007).
• Chapter 4.......................Essential Statistical Tools

6.3 Spot Price Modeling

1. Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition (New York: McGraw-Hill, 2007).
• Chapter 5.......................Spot Price Behavior
2. Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management (London: Lacima
Publications, 2000).
• Chapter 6.......................Spot Price Models and Pricing Standard Instruments

6.4 Forward Price Modeling

1. Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition (New York: McGraw-Hill, 2007).
• Chapter 6.......................The Forward Price Curve
• Chapter 7 .......................Building Marked-to-Market Forward Price Curves
2. Helyette Geman (ed). Risk Management in Commodity Markets: From Shipping to Agriculturals and Energy
(West Sussex, England: John Wiley & Sons, 2008).
• Chapter 2.......................Forward Curve Modeling in Commodity Markets

6.5 Volatility Estimation

1. Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management (London: Lacima
Publications, 2000).
• Chapter 3.......................Volatility Estimation in Energy Markets
2. Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition (New York: McGraw-Hill, 2007).
• Chapter 8.......................Volatilities

6.6 Modeling Energy Price Behavior

1. Alexander Eydeland and Krzysztof Wolyniec. Energy and Power Risk Management: New Developments in
Modeling, Pricing, and Hedging (Hoboken, NJ: John Wiley & Sons, 2003).
• Chapter 4.......................Reduced-form Processes

6.7 Modeling Electricity Price Behavior

1. Markus Burger, Bernhard Graeber, and Gero Schindlmayr. Managing Energy Risk: An Integrated View on Power
and Other Energy Markets (West Sussex, England: John Wiley & Sons, 2007).
• Chapter 4.......................Fundamental Market Models
2. Davis W. Edwards. Energy Trading and Investing (New York: McGraw-Hill, 2010).
• Chapter 4.1 ....................Spatial Load Forecasting

6 © 2011 Global Association of Risk Professionals. All rights reserved.

 2011 Energy Risk Professional (ERP®) Examination Study Guide

Risk Management Techniques—27 Questions

7.1 Overview of Energy Risks

1. Peter C. Beutel. Surviving Energy Prices (Tulsa, OK: PennWell Books, 2005).
• Chapter 3.......................Different Kinds of Risk
2. John Wengler. Managing Energy Risk: A Nontechnical Guide to Markets and Trading (Tulsa, OK: PennWell Books, 2001).
• Chapter 6.......................Energy Risk Boot Camp: “Must Know” Concepts for Managers and Directors
3. Tom James and Peter Fusaro. Energy and Emissions Markets: Collision or Convergence? (Singapore.
John Wiley & Sons (Asia) Pte Ltd., 2006).
• Chapter 10 .....................What Risk? An Introduction to Managing Risk
4. Steve Leppard. Energy Risk Management: A Non-technical Introduction to Energy Derivatives (London: Risk Books, 2005).
• Chapter 8.......................Wider Risk Management Questions

7.2 Operational Risk

1. Tom James. Energy Markets: Price Risk Management and Trading (Singapore: John Wiley & Sons, 2008).
• Chapter 15 .....................Operational Risk and its Management

7.3 Risk Management Controls

1. Tom James. Energy Markets: Price Risk Management and Trading (Singapore: John Wiley & Sons, 2008).
• Chapter 10 .....................Management Controls
2. Tom James and Peter Fusaro. Energy and Emissions Markets: Collision or Convergence? (Singapore.
John Wiley & Sons (Asia) Pte Ltd., 2006).
• Chapter 11 ......................Risk-Policy Guidelines

7.4 Value-at-Risk (VaR)

1. Markus Burger, Bernhard Graeber, and Gero Schindlmayr. Managing Energy Risk: An Integrated View on Power
and Other Energy Markets (West Sussex, England: John Wiley & Sons, 2007).
• Chapter 6.2 ...................Value-at-Risk and Further Risk Measures
2. Alessandro Mauro. “Price Risk Management in the Energy Industry: The Value at Risk Approach,” Proceedings
of the XXII Annual International Conference of the International Association for Energy Economics
(June 9-12, 1999). Available online: http://ssrn.com/abstract=1020917

7.5 Hedging Physical Assets

1. Tom James. Energy Markets: Price Risk Management and Trading (Singapore: John Wiley & Sons, 2008).
• Chapter 13 .....................Energy-Market Hedging Scenarios
2. Steve Leppard. Energy Risk Management: A Non-technical Introduction to Energy Derivatives (London:
Risk Books, 2005).
• Chapter 4.......................Physical Transactions and Basic Hedging Instruments

7.6 Hedging Financial Assets

1. Tom James. Energy Markets: Price Risk Management and Trading (Singapore: John Wiley & Sons, 2008).
• Chapter 6.......................Options Trading and Hedging Application Strategies
2. Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management (London: Lacima
Publications, 2000).
• Chapter 9.......................Risk Management of Energy Derivatives

© 2011 Global Association of Risk Professionals. All rights reserved. 7

2011 Energy Risk Professional (ERP®) Examination Study Guide

7.7 Hedge Accounting

1. Tom James. Energy Markets: Price Risk Management and Trading (Singapore: John Wiley & Sons, 2008).
• Chapter 17 .....................Accounting for Energy Derivatives Trades

7.8 Managing Credit Risk

1. Markus Burger, Bernhard Graeber, and Gero Schindlmayr. Managing Energy Risk: An Integrated View on Power
and Other Energy Markets (West Sussex, England: John Wiley & Sons, 2007).
• Chapter 6.3 ...................Risk Management (Credit Risk)
2. Tom James. Energy Markets: Price Risk Management and Trading (Singapore: John Wiley & Sons, 2008).
• Chapter 16 .....................A Practical Guide to Credit Control and Risk-Mitigation Methods
3. Vincent Kaminski (ed). Energy Modeling: Advances in the Management of Uncertainty (London: Risk Books, 2005).
• Chapter 12 .....................Credit Risk Management for the Energy Industry—Some Perspectives
4. Eduardo Canabarro and Darrell Duffie. ALM of Financial Institutions, ed. Leo Tilman (London: Euromoney, 2003).
• Chapter 9.......................Measuring and Marking Counterparty Risk

Current Issues in Energy—Exam Weight | 10%

NOTE ON THE CURRENT ISSUES IN ENERGY SECTION: GARP recognizes that energy markets are dynamic and are often affected
by regulation, newly discovered reserves and technology breakthroughs. Global energy risk managers must remain abreast of these
developments to effectively manage risk in their businesses. With this goal in mind, GARP is introducing a new “Current Issues in
Energy” section for the 2011 ERP Examination. The “Current Issues” section is designed to familiarize ERP candidates with new devel-
opments and issues that are likely to have a long-term impact on the global energy markets. Topics included in the “Current Issues”
section of the 2011 ERP Examination include Dodd-Frank regulation and its potential impact on energy firms, an introduction to the
Smart Grid, analysis of the 2008 oil price shock and an overview of modern shale gas development. While three of the four topics
focus specifically on the United States, they address topics that will affect energy markets globally; ERP Candidates should consider
this impact when reviewing the material and preparing for the exam. Each reading is current as of November 15, 2010 and candidates
can expect to be tested on the information throughout 2011. Subsequent developments in these topics, or any new areas of focus, will
be captured on the 2012 ERP Examination.

Readings for Current Issues in Energy—18 Questions

1. Skadden, “Energy Derivatives Under the Dodd-Frank Act,” (July 2010).

Available online: http://www.skadden.com/Index.cfm?contentID=51&itemID=2171
2. Sidley Austin, “The Dodd-Frank Act’s Effect on Hedging Activities of Energy Companies and Large Energy Consumers”
Available online: http://www.sidley.com/SidleyUpdates/Detail.aspx?news=4622
3. US Department of Energy, “The Smart Grid: An Introduction”
Available online: http://www.oe.energy.gov/DocumentsandMedia/DOE_SG_Book_Single_Pages(1).pdf
4. Global Public Policy Institute, “The 2008 Oil Price Shock”
Available online: http://www.gppi.net/fileadmin/gppi/GPPiPP1_Oil_Prices_2009.pdf
5. ALL Consulting Report, “An Overview of Modern Shale Gas Development in the United States”
Available online: http://www.all-llc.com/publicdownloads/ALLShaleOverviewFINAL.pdf

8 © 2011 Global Association of Risk Professionals. All rights reserved.

2011 Energy Oversight Committee (EOC) Members

Ken Abbott ..................................Managing Director, Morgan Stanley & Company

Richard Apostolik .....................President and CEO, Global Association of Risk Professionals

Mark Galicia .................................Commercial Manager, BP North America, Inc.

Gordon E. Goodman ................Trading Control Officer, Occidental Petroleum Corporation

James Brown...............................Managing Director, Morgan Stanley & Company

Mark Jenner.................................Director, Credit Risk, BG Group

Jeff Jewell ....................................Chief Risk Officer, DTE Energy

Glenn Labhart, EOC Chair .....Partner, Labhart Risk Advisors, Inc.

Spyros Maragos............................VP, Refined Products Analytics, Louis Dreyfus Energy Services, LP

Alessandro Mauro .....................Director of Risk Management, Litasco SA

Mark D. May ......................................Manager, Regional Risk Supply & Trading, Americas, ConocoPhillips

Jeff Parke .....................................Senior Director, Risk Management, Koch Industries, Inc.

Jonathan C. Stein ......................Chief Risk Officer, Vice President, Hess Corporation

Andrew D. Sunderman ............Managing Director, JP Morgan

Glen Swindle ...............................Managing Director, Energy Trade & Marketing, Credit Suisse

John Wengler .............................Vice President and Chief Risk Officer, BlueStar Energy Services
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About GARP | The Global Association of Risk Professionals (GARP) is a not-for-profit global membership organization dedicated to
preparing professionals and organizations to make better informed risk decisions. Membership represents over 150,000 risk manage-
ment practitioners and researchers from banks, investment management firms, government agencies, academic institutions, and
corporations from more than 195 countries. GARP administers the Financial Risk Manager (FRM®) and the Energy Risk Professional
(ERP®) exams; certifications recognized by risk professionals worldwide. GARP also helps advance the role of risk management via
comprehensive professional education and training for professionals of all levels. www.garp.org.

© 2011 Global Association of Risk Professionals. All rights reserved. 12-10