Foundations of Energy Risk Management

The Global Association of Risk Professionals (GARP) is a not-for-profit association consisting of 74,890 individuals around the world who are involved in financial risk management. Members come from more than 100 countries and work in regional and global banks, asset management firms, insurance companies, central banks, securities regulators, hedge funds, universities, large industrial corporations and multinationals.

• Introduction viiGarp’s Certificate in Energy Risk Management ixGarp’s Foundations of Energy Risk Management Course Specification xiSyllabus and Learning Outcomes xiUser Guide xiiChapter 1: The Energy Cycle 11.1 Introduction 11.2 Exploration 31.3 Production or Extraction 41.4 Processing 61.5 Transportation and Storage 71.6 Refining 81.7 Distribution 81.8 Integrated and Specialty Companies 9Chapter 2: Risks in the Energy Cycle 132.1 Overview 132.2 Market Risk 152.3 Credit Risk 152.4 Operational Risks 162.5 Liquidity Risk 192.6 Political and Regulatory Risk 202.7 Price Risk and Credit Risk 212.8 Integrated Vs. Specialty Companies 222.9 Common Risk Management Tools 232.10 Volatility and Energy Risk Management 24Chapter 3: World Energy Use 273.1 Overview 273.2 Energy Intensity 303.3 Energy Consumption by End-Use Sector 31Chapter 4: Major Sources of Energy 334.1 Overview 334.2 World Crude Oil 354.2.1 Production 354.2.2 Consumption 364.2.3 Oil Reserves 384.2.4 Factors Influencing World Oil Markets 404.2.5 Factors Influencing Crude Oil Prices 404.2.6 Refined Crude Oil Products 424.3 World Natural Gas 454.3.1 Production 454.3.2 Consumption 474.3.3 Natural Gas Reserves 474.3.4 Factors Affecting Gas Markets 504.3.5 Factors Affecting Natural Gas Prices 504.4 World LNG 514.4.1 Recent Developments 524.4.2 The LNG Market 524.5 Coal 534.5.1 Production 544.5.2 Reserves 554.5.3 Consumption 564.5.4 Coal to Liquid Fuels (CTL) 574.6 Power / Electricity 574.6.1 Power Generation 584.6.2 Basic Technical Fundamentals of Power 64Chapter 5: The Markets for Energy Products 695.1 Introduction 695.2 The Physical Markets 705.2.1 Spot Markets 705.2.2 Crude Oil Spot Markets 715.2.3 Crude Oil Forward Markets 715.2.4 Physical Gas Markets 725.3 The Financial Markets 725.3.1 Organization of Financial Markets 735.3.2 Financial Derivatives 755.3.3 Basis Risk 805.3.4 Speculation, Arbitrage and Hedging 815.4 The Relationship Between the Physical and Financial Prices 855.5 Emission Trading 865.5.1 Emission Trading Programs 875.5.2 Emission Trading in the United States 875.5.3 Emission Trading in the European Union 885.5.4 Kyoto Protocol 88Chapter 6: Real Options in the Energy Market 91Glossary 95Index 109Acknowledgments 119