2012 ERP Exam Preparation Handbook

The designation for risk professionals in the energy sector

2012 Energy Risk Professional (ERP) Examination Preparation Handbook

A Framework for Tackling the ERP Exam The ERP Exam Preparation Handbook is a study aid for candidates to reference as they prepare to take the Energy Risk Professional (ERP) Exam. The Handbook highlights key concepts, fundamental knowledge and quantitative relationships found in the readings outlined in the ERP Study Guide and is intended to augment, not to replace, the ERP Examination AIM Statements or Study Guide respectively; it is strongly recommended that candidates incorporate these documents in their exam preparation. About the ERP Examination The ERP Examination consists of 160 questions drawn exclusively from the core readings outlined in the ERP Study Guide. The content covered in the coure readings spans both the physical commodity and financial energy markets and has been compiled in consultation with GARPs Energy Oversight Committee (EOC). While many of the readings are written from a risk management point-of-view, some others are not. In fact, a number of readings for topics within the physical commodity section may be somewhat technical or scientific in nature. In these cases, candidates should focus not on the technical details of the reading but rather on the overall content of the material from the perspective of a risk manager with an eye towards applying the information towards situations they may encounter during their energy risk career. For example, candidates will not be asked specific engineering questions (such as calculating pipeline wall strength) or highly in-depth geologic questions on the ERP Exam. If candidates

are unsure of the purpose of a reading, they should always consult the relevant AIM Statements for guidance. Moreover, it is possible that outside material the candidate has read may provide information or definitions that conflict with a core ERP reading. In the case of such a conflict, the candidate should always rely on the core readings referenced in the ERP Study Guide as questions on the ERP Exam will be drawn exclusively from this material. Preparation for the Exam The Energy Risk Professional certification Exam is a self-directed study program. One often asked question is: how long will it take me to prepare for the ERP Exam? Unfortunately, this question has no simple answer. Exam preparation will vary from individual to individual and will be based on a number of factors including an individuals professional experience, their general level of knowledge of the energy markets and reading comprehension aptitude. For past exams, a majority of candidates report spending between 150 to 300 hours preparing for the exam. To accommodate those demands, this handbook offers two reading plans to distribute the reading material over 15- or 20-week intervals. However, these plans are only meant to be a guideline; you may feel the need for more or less preparation time. In general, GARP recommends that candidates prepare for the exam at a gradual but steady pace; attempting to cram study time into the weeks immediately before the exam is not likely to be a successful preparation method.

Exam preparation will vary from individual to individual and will be based on a number of factors including an individuals professional experience, their general level of knowledge of the energy markets and reading comprehension aptitude.

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2012 Energy Risk Professional (ERP) Examination Preparation Handbook

AIM Statements, Practice Exams and Quizzes

The AIM Statements have been developed as a general guide for exam question development and should be referenced in conjunction with the core readings contained in the ERP Study Guide. Reviewing the material in the Study Guide with the AIM statements in mind will help candidates to better prepare for the exam by focusing their attention on the topics considered most relevant and applicable to a risk management practitioner in the energy industry. To further assist candidates in their preparation for the ERP Examination, GARP has created ERP Practice Exams and Practice Quizzes that are available on our website. The Practice Exams are designed to simulate both the style and range of questions found on the ERP Examination, thus helping ERP Candidates to gauge the expected time necessary to answer individual questions and to devise an exam day strategy. Each of the four Practice Quizzes provide a series of ten review questions which focus on specific sections of the ERP Examination: Hydrocarbons, Electricity/Renewables, Financial Products, and Modeling/Risk Management techniques. The Practice Quizzes are designed to provide candidates with a tool to review and test their comprehension of key concepts as they work through the study plans outlined herein. It is strongly suggested that Practice Quizzes be taken after a candidate completes their review of the core readings that precede each quiz (please see the 15- and 20-week reading plans for more information). Practice Exams and Practice Quizzes include explanations of the correct answer for each question so that candidates can better understand their incorrect replies and identify areas of weakness that need reinforcement. The ERP Practice Exams and Practice Quizzes are available for free download on the GARP website at http://www.garp.org/erp/study-center/free-practice-exams.aspx.

Study Groups

GARP strongly encourages candidates to form study groups, whenever possible, so that they may prepare for the examination with others. Study groups are a great way for candidates to share the study load while helping each other with topics where they may individually have a weakness; it is also a good way to meet fellow ERP candidates. We encourage candidates to use both the official ERP Facebook and LinkedIn pages to find or form local study groups for the ERP Exam. Finally, there are a number of third-party course providers who offer ERP Exam preparation courses for candidates who feel they may benefit from a more structured test-preparation program. A list of GARP-approved third-party course providers can be found at http://www.garp.org/erp/study-center/exam-preparation-providers.aspx.

Exam Language

The dialect used in the examination is American English. GARP is aware that not every ERP candidate has American English as his or her native language. In the exam development process, GARP strives to ensure that questions are written in a clear, concise form and avoid the use of colloquialisms or other terms or phrases that may be unfamiliar to a non-native American English speaker.

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2012 Energy Risk Professional (ERP) Examination Preparation Handbook

Calculator Policy

Only the following types of business calculators are authorized for use on the examination, there will be no exceptions to this policy. Use of a non-authorized calculator during the exam will result in the candidates answer sheet not being graded, and the candidate receiving no score for the exam. Candidates may not consult the operators manual for their calculator during the exam. Calculator memory must be cleared prior to the start of the exam. The only calculators approved for use during the ERP Examination are: Texas Instruments BA II Plus (both versions) including the BA II Plus Professional Hewlett Packard 10B II, 10B II+, 20B, 12C (including the HP 12C Platinum and the Anniversary Edition) To help ensure a positive exam experience, candidates should review all information about exam day procedures at http://www.garp.org/erp/exam-overview/exam-day-information.aspx. No exceptions to these procedures will be made on exam day.

Key Concepts, Quantitative Relationships, Common Abbreviations and Contract Specifications

The key concepts listed below are intended to help candidates identify the major themes from each section of the Study Guide. These represent the core concepts that ERP candidates should be well versed in as they prepare for a career in the field of energy risk management. Candidates should note that in many cases a key concept will relate directly or indirectly to several AIM statements throughout the core readings. Hydrocarbon Resources The legal aspects of how mineral rights to a reserve are acquired; how reserves are put into production Crude oil grades, specifications and relative value against benchmark crudes How crude oil prices are set by the global market The basics of the refining processwhat products are created from crude oil, refinery complexity and how complexity affects operating costs and production decisions Unconventional hydrocarbon resources and their growing importance for global markets Basics of the natural gas industry including volumetric and heat measures, and what constitutes natural gas Liquefied Natural Gas (LNG)how is it produced, how contracts for trade are structured and the role of LNG in the global energy market today Techniques like the Fischler-Tropsch and Gas-to-Liquids processes and the commodities they produce The impact of shale gas on global gas pricing and market economics Grades of coal, including their heat content rankings

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2012 Energy Risk Professional (ERP) Examination Preparation Handbook

Key Concepts, Quantitative Relationships, Common Abbreviations and Contract Specifications

Electricity Generation, Distribution and Trading Electricity market fundamentals including the factors that influence how rates are set Source fuels for electricity production (including Nuclear and Hydro), knowledge of the benefits and drawbacks of each Heat rate and spark spread calculationshow they are performed and how they impact market decisions The fundamentals of electricity transmission and the unique financial products used to market electricity The differences between a regulated and deregulated electricity market; the key operational features of the deregulated market Renewables, Trends in the Carbon Market and Emissions Trading Fundamental economic drivers of renewable energy projects The sources of energy that are considered renewable, the benefits and drawbacks of each How market-based carbon credit/carbon offset transactions work Project finance calculations and investment decisions associated with renewable projects Current regulatory trends in global carbon markets and clean-air regulation

Financial Products, Trading, Hedging and Valuation Understand the difference between forward and future contracts, how and why each is used Relate the impact of storage cost, convenience yield and lease rate on forward pricing Evaluate the various types of financial instruments used in energy transactions, including the different kinds of swaps, options and structured transactions and their practical application Appreciate the unique characteristics of energy and natural gas commodities and understand how these traits affect the market for electricity and natural gas commodity trading and valuation Be able to create and evaluate a basic arbitrage transaction using energy commodities and evaluate the risk/reward associated with fundamental trading positions Develop a working knowledge of the greeks and understand how they relate to option valuation and risk management Construct a basic hedge position and understand what it means to dynamically hedge a position Be able to construct and evaluate a hedge for physical and/or financial assets Understand real option valuation and how it is used for investment decisions Use a binomial lattice to value a real option

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2012 Energy Risk Professional (ERP) Examination Preparation Handbook

Key Concepts, Quantitative Relationships, Common Abbreviations and Contract Specifications

Modeling Techniques for Energy Commodities Understand the purpose of modeling; know the basic model types and parameters, including their limitations Know the terms backwardation and contango and how they affect forward price curves Understand the key concepts related to volatility including the differences between historical volatility, market implied volatility, model implied volatility, volatility skews and smiles and annualized volatility Know the special challenges associated with modeling electricity

Risk Management Fundamentals Identify the various types of risk: what are they, in what situations are they found and how are they managed Understand Value-at-Risk (VaR), how it is calculated, and how it is used Know the types of stress tests typically used by financial organizations and the general benefits of stress testing Understand the difference between counterparty risk and credit/lending risk Know the role of a central clearinghouse in financial transactions Understand the relationship between Expected Exposure and Potential Future Exposure Be familiar with the fundamentals of Enterprise Risk Management (ERM)

Current Events The Current Events section is designed to capture several developing industry trends that may impact the decision-making process of an energy risk professional, yet are too recent to be addressed in published text books on energy risk management. Candidates should study and understand the basic concepts associated with each reading as summarized within the AIM statements related to each.

Fundamental Theories and Quantitative Relationships

The ERP Exam is not meant to be a rigorous quantitative exercise that requires memorization of highly complex formulas. ERP candidates are, however, expected to have an understanding of fundamental quantitative concepts and relationships covered in the core readings. Candidates should be prepared to solve a number of mathematical calculations based solely on their understanding of these fundamental concepts. While we do not provide a list of formulas for the exam, in some cases, particularly for more complex or obscure calculations, information about terms or values within an equation may be provided to the candidate in the question.

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2012 Energy Risk Professional (ERP) Examination Preparation Handbook

Fundamental Theories and Quantitative Relationships

Fundamental data analysis concepts include but are not limited to: Time series analysis and normal vs. lognormal distribution analyses Mean, standard deviation, skew, kurtosis Statistical testing for data integrity and measures of fit Mean reversion

Fundamental pricing and valuation theories include but are not limited to: Spot price estimation Forward price estimation Futures price estimation using energy commodity spot price data Option valuation Real option valuation

Fundamental quantitative relationships include but are not limited to: Barrel of Oil Equivalency (BOE) Gas/oil ratio Energy commodity calculations: heat rate, crack spread, spark spread Zero coupon bond payoffSynthetic commodity Energy commodity future and forward contract valuation Energy commodity arbitrage profit/loss Payoff profile for American, European and various exotic options Cashflows associated with various types of swap transactions Put/call parity Profit/loss position for straddle, collars and other hedging structures Net profit calculation for a power plant Volatility estimation using historical data and market implied prices Average long-term volatility from discrete volatilities Fixed-for-floating swap settlement calculations Value-at-Risk (VaR) of an asset or portfolio for a given confidence level Calculate credit risk exposures including: settlement risk, replacement risk, expected exposure and potential future exposure Heating and cooling degree days (HDD/CDD)

Common Abbreviations

The following is a list of abbreviations commonly used in the energy risk management profession; many of these abbreviations will likely appear on the ERP Examination. Candidates are advised to be familiar with all of the abbreviations on this list before sitting for the exam.

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2012 Energy Risk Professional (ERP) Examination Preparation Handbook

Common Abbreviations

ATM Bbl BCF Btu CAD CEO CFO CFTC CIF CME CNG CO2 CRO ERCOT ERM EUR FASB GBM GO GTL ICE ISO ITM kW kWh LNG LPG LSFO MISO MMBtu MT MTM MW MWh NGL NWE OTC OTM PJM RBOB RTO Therm USD VaR WTI

At-the-money Barrel of _________ Billion Cubic Feet (gas measurement) British Thermal Unit Canadian Dollar Chief Executive Officer Chief Financial Officer Commodity Futures Trading Commission Cargo, Insurance, Freight Chicago Mercantile Exchange Compressed Natural Gas Carbon dioxide Chief Risk Officer Electric Reliability Council of Texas Enterprise Risk Management Euro (currency) Financial Accounting Standards Board Geometric Brownian Motion Gasoil Gas-to-liquids Intercontinental Exchange (London) Independent System Operator In-the-money Kilowatt Kilowatt hour Liquefied Natural Gas Liquid Petroleum Gas Low-Sulfur Fuel Oil Midwest Independent System Transmission Operator (electricity market) One million British Thermal Units Metric ton Mark-to-market Megawatt Megawatt hour Natural Gas Liquids Northwest Europe (Rotterdam, physical delivery point for gas/oil contracts) Over-the-counter Out-of-the-money Pennsylvania/New Jersey/Maryland Interconnection (electricity market) Reformulated Blendstock for Oxygenate Blending (standard NYMEX gasoline contract) Regional Transmission Organization A measure equal to 100,000 BTUs United States Dollar Value-at-Risk West Texas Intermediate (crude oil )
7

NYMEX New York Mercantile Exchange

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2012 Energy Risk Professional (ERP) Examination Preparation Handbook

Standard Energy Contract Specifications

Exchange traded energy commodity futures and options contracts are typically traded in standardized lot sizes. Listed below are the volumetric sizes of key energy commodity futures and options contracts traded on exchanges like the CME, ICE and NYMEX. Candidates are advised to be familiar with the characteristics of standard exchange-traded contracts before sitting for the exam. Crude Oil: each contract is for 1,000 barrels (equal to 42,000 gallons) Heating Oil: each contract is for 42,000 gallons Gasoline (and other distillates): 42,000 gallons ICE Gasoil Futures: 100 Metric Tons Natural Gas (Henry Hub Futures): 10,000 MMBtu Natural Gas Swap (Henry Hub, Chicago, others): 2,500 MMBtu Electricity (CME PJM futures contracts): 5 MWh Electricity (ICE UK Base futures contracts): 5 MWh minimum Electricity (CME options contracts): 40 MWh Electricity (NYMEX futures contracts): 40 MWh

15- and 20-Week Study Plans

Outlined on the following pages are two suggested plans, covering 15 and 20 weeks, respectively, for tackling the material outlined in the ERP Study Guide. Weekly readings include selections from Current Issues in Energy, paired whenever possible with relevant topics from other portions of the Study Guide. The primary goal of the plans is to break the core readings down into logical pieces that can be disseminated by candidates more efficiently. Every candidate has a unique level of experience and reading aptitude; it is impossible to accurately judge the amount of time necessary for each individual candidate to prepare for the exam. Both the 15- and 20-week study plans are offered simply as a guideline or tool for approaching the material. Candidates should always feel free to adjust the schedule based on their experience, study time available and possible desire to add variety by intertwining physical and financial readings.

2012 Global Association of Risk Professionals. All rights reserved.

ERP Exam 15-Week Study Plan

2012 Energy Risk Professional (ERP) Examination Preparation Handbook

Description

Session

Reading

Hydrocarbon Resources

Institut Franais du Petrol Publications. Oil, Gas Exploration, and Production: Reserves, Costs, Contracts (Paris: Editions Technip, 2007). Chapter 3. Charlotte Wright and Rebecca Gallun. Fundamentals of Oil & Gas Accounting, 5th Edition (Tulsa, OK: PennWell, 2008). Chapters 1 and 15. Norman J. Hyne. Nontechnical Guide to Petroleum Geology, Exploration, Drilling, and Production, 2nd Edition (Tulsa, OK: PennWell Books, 2001). Chapter 1. Purvin & Gertz, Inc. The Role of WTI as a Crude Oil Benchmark. Section Three. William L. Leffler. Petroleum Refining in Nontechnical Language, 3rd Edition (Tulsa, OK: PennWell, 2000). Chapter 20. Bunkerworld. D2 and No.2 Diesel Fuel: An Introduction.

Davis W. Edwards. Energy Trading and Investing (New York: McGraw-Hill, 2010). Chapter 2.1. Vivek Chandra. Fundamentals of Natural Gas: An International Perspective (Tulsa, OK: PennWell Books, 2006). Chapters 1, 2, 3, and 4. Frank Fabozzi (ed.): The Handbook of Commodity Investing (Hoboken, NJ: John Wiley & Sons, 2008). Chapter 36. Thomas O. Miesner and William L. Leffler. Oil and Gas Pipelines in Nontechnical Language (Tulsa, OK: PennWell Books, 2006). Chapters 10 and 12.

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). Chapter 4. Department of Energy Publication: Liquefied Natural Gas: Understanding the Basic Facts. PriceWaterhouseCoopers: Todays LNG Market Dynamics. Kenneth Medlock. Impact of Shale Gas Development on Global Gas Markets (Wiley Periodicals, Inc., 2011). International Monetary Fund. Oil Scarcity, Growth and Global Imbalances.

James Speight. Handbook of Coal Analysis (Wiley-Interscience, 2005). Chapters 1 and 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). Chapters 3 and 6. Richard Morse and Gang He. The World's Greatest Coal Arbitrage: China's Coal Import Behavior and Implications for the Global Coal Market. Take ERP Practice Quiz #1

10

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2012 Energy Risk Professional (ERP) Examination Preparation Handbook

Description

Session

Reading

Electricity

Davis W. Edwards. Energy Trading and Investing (New York: McGraw-Hill, 2010). Chapters 2.2 and 4.1. Chris Harris. Electricity Markets: Pricing, Structures and Economics (West Sussex, England: John Wiley & Sons, 2006). Chapter 7. Sally Hunt. Making Competition Work in Electricity (New York: John Wiley & Sons, Inc., 2002). Chapters 2, 7 and 8.

Davis W. Edwards. Energy Trading and Investing (New York: McGraw-Hill, 2010). Chapters 4.3 and 4.4. 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. David Schlissel and Bruce Biewald. Nuclear Power Plant Construction Costs (Synapse Energy Economics, Inc.). Peter Coy. The Prospect for Safe Nuclear (Bloomberg Businessweek, March 24, 2011). Ann Chambers. Renewable Energy in Nontechnical Language (Tulsa, OK: PennWell Books, 2006). Chapter 6.

Renewable Energy

Geoffrey Heal. The Economics of Renewable Energy. Chris Grobey, John Pierce, Michael Faber and Greg Broome. Project Finance Primer for Renewable Energy and Clean Tech Projects. State and Trends of the Carbon Market (The World Bank, 2011). Sections 2 though 4. Roy L. Nersesian. Energy for the 21st Century: A Comprehensive Guide to Conventional and Alternative Sources (Armonk, NY: M.E. Sharpe, Inc., 2007). Chapter 9. Govinda Timilsina and Ashish Shrestha. Biofuels: Markets, Targets and Impacts (The World Bank, July 2010). Sections 1 through 5. Frank Fabozzi (ed.): The Handbook of Commodity Investing (Hoboken, NJ: John Wiley & Sons, 2008). Chapter 37. Bloomberg New Energy Finance. Global Trends in Renewable Energy Investment. Take ERP Practice Quiz #2

Financial Products

Steven Errera and Stewart L. Brown. Fundamentals of Trading Energy Futures & Options, 2nd Edition (Tulsa, OK: PennWell Books, 2002). Chapter 3. Vincent Kaminski (ed). Managing Energy Price Risk (London: Risk Books, 2004). Chapters 1, 2 and 3. Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates. CFTC Adopts Final Position Limit Rules at October 18 Open Meeting. Ivan Diaz-Rainey, Mathias Siems and John Ashton. The Financial Regulation of European Wholesale Energy and Environmental Markets.

2012 Global Association of Risk Professionals. All rights reserved.

11

2012 Energy Risk Professional (ERP) Examination Preparation Handbook

Description

Session

Reading

Financial Products

Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management (London: Lacima Publications, 2000). Chapter 9. Robert McDonald, Derivatives Markets, 2nd Edition (Boston: Addison-Wesley, 2006). Chapter 6. Steven Errera and Stewart L. Brown. Fundamentals of Trading Energy Futures & Options, 2nd Edition (Tulsa, OK: PennWell Books, 2002). Chapter 4. Steve Leppard. Energy Risk Management: A Non-technical Introduction to Energy Derivatives (London: Risk Books, 2005). Chapter 4. Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition (New York: McGraw Hill, 2007). Chapters 9 and 10.

10

Alexander Triantis. Handbook of Modern Finance (New York: Research Institute of America, 2003). Chapter 7. William Bailey, Benoit Couet, Ashish Bhandari, Soussan Faiz, Sunaram Srinivasan and Helen Weeds. Unlocking the Value of Real Options (Oilfield Review Winter 2003/2004). Peter C. Beutel. Surviving Energy Prices (Tulsa, OK: PennWell Books, 2005). Chapter 3. Tom James. Energy Markets: Price Risk Management and Trading (Singapore: John Wiley & Sons, 2008). Chapter 13. Geoffrey Considine, Ph.D. Introduction to Weather Derivatives. Kevin Baumert and Mindy Selman. Data Note: Heating and Cooling Degree Days (World Resources Institute, 2003). Take ERP Practice Quiz #3

Modeling Energy Prices

11

Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition (New York: McGraw Hill, 2007). Chapters 2, 5 and 8. Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management (London: Lacima Publications, 2000). Chapter 2. Helyette Geman (ed). Risk Management in Commodity Markets: From Shipping to Agriculturals and Energy. Chapter 2.

12

Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition (New York: McGraw Hill, 2007). Chapter 4. Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management (London: Lacima Publications, 2000). Chapters 3, 4 and 8.

12

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2012 Energy Risk Professional (ERP) Examination Preparation Handbook

Description

Session

Reading

Risk Management Fundamentals

13

Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management (London: Lacima Publications, 2000). Chapter 10. 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). Chapters 6.2 and 6.3. 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). Jose Ramon Aragones, Carlos Blanco, and Kevin Dowd. Incorporating Stress Tests Into Market Risk Modeling. Craig Pirrong. The Economics of Central Counterparty Clearing: Theory and Practice. (ISDA Working Paper).

14

Tom James. Energy Markets: Price Risk Management and Trading (Singapore: John Wiley & Sons, 2008). Chapters 10, 15 and 16. Jon Gregory. Counterparty Credit Risk (West Sussex, England: John Wiley & Sons, 2010). Chapters 2 and 3. Casualty Actuarial Society, Enterprise Risk Management Committee. Overview of Enterprise Risk Management. Ludwig Chincarini. A Case Study on Risk Management: Lessons from the Collapse of Amaranth Advisors L.L.C. Connecticut Law Review. Risk Management and Corporate Governance: The Case of Enron. NERA Economic Consulting. Lessons from the BP Deepwater Horizon Oil Spill (September 2010). Mark A. Cohen, Madeline Gottlieb, Joshua Linn, and Nathan Richardson. Deepwater Drilling: Law, Policy and Economics of Firm Organization and Safety. Take ERP Practice Quiz #4

Review

15

Take ERP Practice Examination(s) http://www.garp.org/erp/study-center/free-practice-exams.aspx Review any areas of the ERP Study Guide where additional preparation is necessary.

2012 Global Association of Risk Professionals. All rights reserved.

13

ERP Exam 20-Week Study Plan

2012 Energy Risk Professional (ERP) Examination Preparation Handbook

Description

Session

Reading

Hydrocarbons Resources

Institut Franais du Petrol Publications. Oil, Gas Exploration, and Production: Reserves, Costs, Contracts (Paris: Editions Technip, 2007). Chapter 3. Charlotte Wright and Rebecca Gallun. Fundamentals of Oil & Gas Accounting, 5th Edition (Tulsa, OK: PennWell, 2008). Chapters 1 and 15. Norman J. Hyne. Nontechnical Guide to Petroleum Geology, Exploration, Drilling, and Production, 2nd Edition (Tulsa, OK: PennWell Books, 2001). Chapter 1. Thomas O. Miesner and William L. Leffler. Oil and Gas Pipelines in Nontechnical Language (Tulsa, OK: PennWell Books, 2006). Chapters 10 and 12.

Purvin & Gertz, Inc. The Role of WTI as a Crude Oil Benchmark. Section Three. William L. Leffler. Petroleum Refining in Nontechnical Language, 3rd Edition (Tulsa, OK: PennWell, 2000). Chapter 20. Bunkerworld. D2 and No.2 Diesel Fuel: An Introduction. James Speight. Handbook of Coal Analysis (Wiley-Interscience, 2005). Chapters 1 and 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). Chapters 3 and 6. Richard Morse and Gang He. The World's Greatest Coal Arbitrage: China's Coal Import Behavior and Implications for the Global Coal Market.

Davis W. Edwards. Energy Trading and Investing (New York: McGraw-Hill, 2010). Chapter 2.1. Vivek Chandra. Fundamentals of Natural Gas: An International Perspective (Tulsa, OK: PennWell Books, 2006). Chapters 1, 2, 3, and 4. Frank Fabozzi (ed.): The Handbook of Commodity Investing (Hoboken, NJ: John Wiley & Sons, 2008). Chapter 36.

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). Chapter 4. Department of Energy Publication: Liquefied Natural Gas: Understanding the Basic Facts. PriceWaterhouseCoopers: Todays LNG Market Dynamics. Kenneth Medlock. Impact of Shale Gas Development on Global Gas Markets (Wiley Periodicals, Inc., 2011). International Monetary Fund. Oil Scarcity, Growth and Global Imbalances. Take ERP Practice Quiz #1

2012 Global Association of Risk Professionals. All rights reserved.

15

2012 Energy Risk Professional (ERP) Examination Preparation Handbook

Description

Session

Reading

Electricity

Sally Hunt. Making Competition Work in Electricity (New York: John Wiley & Sons, Inc., 2002). Chapters 2, 7 and 8. Chris Harris. Electricity Markets: Pricing, Structures and Economics (West Sussex, England: John Wiley & Sons, 2006). Chapter 7.

Davis W. Edwards. Energy Trading and Investing (New York: McGraw-Hill, 2010). Chapters 2.2, 4.1, 4.3 and 4.4. Ann Chambers. Renewable Energy in Nontechnical Language (Tulsa, OK: PennWell Books, 2006). Chapter 6.

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. David Schlissel and Bruce Biewald. Nuclear Power Plant Construction Costs (Synapse Energy Economics, Inc.). Peter Coy. The Prospect for Safe Nuclear (Bloomberg Businessweek, March 24, 2011).

Renewable Energy

Geoffrey Heal. The Economics of Renewable Energy. Chris Grobey, John Pierce, Michael Faber and Greg Broome. Project Finance Primer for Renewable Energy and Clean Tech Projects. State and Trends of the Carbon Market (The World Bank, 2011). Sections 2 though 4.

Roy L. Nersesian. Energy for the 21st Century: A Comprehensive Guide to Conventional and Alternative Sources (Armonk, NY: M.E. Sharpe, Inc., 2007). Chapter 9. Govinda Timilsina and Ashish Shrestha. Biofuels: Markets, Targets and Impacts (The World Bank, July 2010). Sections 1 through 5. Frank Fabozzi (ed.): The Handbook of Commodity Investing (Hoboken, NJ: John Wiley & Sons, 2008). Chapter 37 Bloomberg New Energy Finance. Global Trends in Renewable Energy Investment. Take ERP Practice Quiz #2

Financial Products

10

Steven Errera and Stewart L. Brown. Fundamentals of Trading Energy Futures & Options, 2nd Edition (Tulsa, OK: PennWell Books, 2002). Chapter 3. Ivan Diaz-Rainey, Mathias Siems and John Ashton. The Financial Regulation of European Wholesale Energy and Environmental Markets. Vincent Kaminski (ed). Managing Energy Price Risk (London: Risk Books, 2004). Chapters 1 and 2. Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates. CFTC Adopts Final Position Limit Rules at October 18 Open Meeting.

16

2012 Global Association of Risk Professionals. All rights reserved.

2012 Energy Risk Professional (ERP) Examination Preparation Handbook

Description

Session

Reading

Financial Products

11

Vincent Kaminski (ed). Managing Energy Price Risk (London: Risk Books, 2004). Chapter 3. Robert McDonald, Derivatives Markets, 2nd Edition (Boston: Addison-Wesley, 2006). Chapter 6. Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management (London: Lacima Publications, 2000). Chapter 9. Geoffrey Considine, Ph.D. Introduction to Weather Derivatives. Kevin Baumert and Mindy Selman. Data Note: Heating and Cooling Degree Days. (World Resources Institute, 2003).

12

Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition (New York: McGraw Hill, 2007). Chapters 9 and 10. Alexander Triantis. Handbook of Modern Finance (New York: Research Institute of America, 2003). Chapter 7. William Bailey, Benoit Couet, Ashish Bhandari, Soussan Faiz, Sunaram Srinivasan and Helen Weeds. Unlocking the Value of Real Options (Oilfield Review Winter 2003/2004).

13

Steven Errera and Stewart L. Brown. Fundamentals of Trading Energy Futures & Options, 2nd Edition (Tulsa, OK: PennWell Books, 2002). Chapter 4. Peter C. Beutel. Surviving Energy Prices (Tulsa, OK: PennWell Books, 2005). Chapter 3. Tom James. Energy Markets: Price Risk Management and Trading (Singapore: John Wiley & Sons, 2008). Chapter 13. Steve Leppard. Energy Risk Management: A Non-technical Introduction to Energy Derivatives (London: Risk Books, 2005). Chapter 4. Take ERP Practice Quiz #3

Modeling Energy Prices

14

Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition (New York: McGraw Hill, 2007). Chapters 2 and 5. Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management (London: Lacima Publications, 2000). Chapter 2.

15

Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition (New York: McGraw Hill, 2007). Chapter 4. Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management (London: Lacima Publications, 2000). Chapters 4 and 8.

16

Helyette Geman (ed). Risk Management in Commodity Markets: From Shipping to Agriculturals and Energy. Chapter 2. Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management (London: Lacima Publications, 2000). Chapter 3. Dragana Pilipovic. Energy Risk: Valuing and Managing Energy Derivatives, 2nd Edition (New York: McGraw Hill, 2007). Chapter 8.

2012 Global Association of Risk Professionals. All rights reserved.

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2012 Energy Risk Professional (ERP) Examination Preparation Handbook

Description

Session

Reading

Risk Management Fundamentals

17

Les Clewlow and Chris Strickland. Energy Derivatives: Pricing and Risk Management (London: Lacima Publications, 2000). Chapter 10. 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. 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). Jose Ramon Aragones, Carlos Blanco, and Kevin Dowd. Incorporating Stress Tests Into Market Risk Modeling.

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Tom James. Energy Markets: Price Risk Management and Trading (Singapore: John Wiley & Sons, 2008). Chapter 10, 15 and 16. 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. Casualty Actuarial Society, Enterprise Risk Management Committee. Overview of Enterprise Risk Management. NERA Economic Consulting. Lessons from the BP Deepwater Horizon Oil Spill (September 2010).

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Jon Gregory. Counterparty Credit Risk (West Sussex, England: John Wiley & Sons, 2010). Chapters 2 and 3. Craig Pirrong. The Economics of Central Counterparty Clearing: Theory and Practice. (ISDA Working Paper). Mark A. Cohen, Madeline Gottlieb, Joshua Linn, and Nathan Richardson. Deepwater Drilling: Law, Policy and Economics of Firm Organization and Safety. Ludwig Chincarini. A Case Study on Risk Management: Lessons from the Collapse of Amaranth Advisors L.L.C. Connecticut Law Review. Risk Management and Corporate Governance: The Case of Enron. Take ERP Practice Quiz #4

Review

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Take ERP Practice Examination(s) http://www.garp.org/erp/study-center/free-practice-exams.aspx Review any areas of the ERP Study Guide where additional preparation is necessary. ERP ExaminationMay 19, 2012 and November 17, 2012

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2012 Global Association of Risk Professionals. All rights reserved.

2012 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 .............................Director of Market Risk Controls, Hess Corporation

Creating a culture of risk awareness.TM

Global Association of Risk Professionals 111 Town Square Place Suite 1215 Jersey City, New Jersey 07310 USA + 1 201.719.7210 2nd Floor Bengal Wing 9A Devonshire Square London, EC2M 4YN UK + 44 (0) 20 7397 9630 www.garp.org

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 management practitioners and researchers from banks, investment management firms, government agencies, academic institutions, and corporations from more than 195 countries and territories. 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.

2012 Global Association of Risk Professionals. All rights reserved. 1-4-12