Energy Risk Professional Survey

I hope you are all doing well in your ERP exam preparations! As you know, there is only a limited number of study material available, and I am currently thinking which products could help ERP candidates the most to successfully prepare for the exam. For this reason, I have created a brief survey with ten questions.

If you have a few minutes, please fill out the survey, this will help me prepare better learning material. As always, if you have any questions about the ERP exam, please feel free to contact me.

Here’s to you and your ERP success!

LNG In A Nutshell

LNG is short for liquid natural gas. The benefit of LNG is that it is an easily transportable and storable liquid that takes up only 1/600th of the original volume of natural gas in its gaseous state.

The LNG Industry is based largely on a series of virtually self-contained projects made up of interlinking chains of large-scale facilities that are bound together by complex, long-term contracts. The industry is subject to intense oversight by host governments and international organisations at every stage of the process. All the LNG facilities together make up the “LNG chain”, consisting of the following components:

  1. Natural gas production.
  2. Liquefaction. Turning the gas into liquid (LNG) by cooling it down to -163 degree Celsius.
  3. Shipping. Large scale vessels equipped with spherical tanks or membrane tanks.
  4. Regasification terminals. Heating up the LNG and turning it back into gas.
  5. Delivery by pipeline or truck.

Natural gas production will not be discussed here, as it is the same for natural gas, CNG, and LNG.


The single largest investment in the chain is the liquefaction plant which removes impurities from the gas and cools it down to -163 degrees Celsius. Gas composition, quantity and location have important bearings on the design of the liquefaction plant, but at heart they are simply giant refrigerators. All LNG facilities generally require huge capital investments.


Shipping has become the most competitive and therefore transparent part of the LNG chain. Fleet ownership structures are:

  1. Fleet is owned by an independent shipowner and chartered out to seller or buyer under a long-term lease contract.
  2. Fleet is owned directly by the LNG seller or his SPV (indirect ownership through a special purpose vehicle).
  3. Fleet is owned directly by the LNG buyer or his SPV.

Tanker ownership, management and control are often separated. Control is often through the buyer or the seller (disponent owner, or time-chartered owner) since the ship is not registered with the actual owner.

The phases of ship operation are:

  1. Cooldown prior to loading. Often through keeping some LNG in the tanks after discharge (LNG heel).
  2. Boil-off. Used to power the ship’s steam turbines or dual-fuel marine diesel engines. Even today, insulation of the tanks is not perfect, so boil-off is still between 0.1-0.25% of cargo per day.
  3. Cargo loading/discharge, taking each up to 14 hours.

LNG is sold in two ways;

  1. Free on board (FOB). The buyer is responsible for arranging the shipping and title to the cargo transfers on loading. Used when buyer controls shipping.
  2. Delivered ex-ship or CIF (cost, insurance, and freight). Seller arranges the shipping and the title is transferred at the destination or after loading.

Regasification terminals

Regasification terminals are where LNG cargoes are discharged, turned back into gas by heating through vaporizers, and odorized for security purposes. Regasification terminals are also called loading or receiving terminals, which are usually owned by the customer and operated on a proprietary basis. On occasion, there may be leases for third-party access. A terminal consists of:

  1. One or more berths with unloading arms.
  2. LNG storage tanks.
  3. Vaporization equipment to move the regasified LNG into pipelines.

More than 60% of total cost of an LNG receiving terminal is associated with the construction of the storage tanks, marine and off-loading facilities, and safety systems. The final construction cost is determined by the following cost drivers for receiving terminals are:

  1. Local geologic considerations and the need to tailor infrastructure to them.
  2. Cost of real estate. In Japan, facilities are built on made land, which is expensive.
  3. Site layout, regulatory, and safety considerations. Number and type of storage tanks can account for cost variances of up to five times.
  4. Local labour and construction cost.
  5. Vaporization technology. Open-rack or gas-fired.
  6. Use of local power supplies or development of dedicated power generation.
  7. Need for downstream facilities to tie into the pipeline grid, including pipelines and gas treatment and odorization plants.
  8. Marine environment. Berth location, distance to tanks, etc.
  9. Licensing and permitting activities needed to accommodate local residential or environmental concerns.
  10. Upgrading existing infrastructure, roads, etc.

History of LNG

In the early stages of the industry (1960’s), there were only a handful LNG players, known as “the club”, as capital costs were very high with uncertain prospects of ever being profitable. Even a successful LNG project was only marginally profitable then. Today, it is contended that natural gas will be the number one energy source by 2020, surpassing coal. The EIA predicts that the world gas consumption will increase by 70% between 2005 and 2025.

Energy Risk Professional Salary

A question I often hear is “How much can I expect to earn as an Energy Risk Professional?” Obviously, this largely depends on one’s education and experience. I went ahead and searched for ERP salaries on an entry level on and Simplyhired lets you calculate average salaries for jobs posted on their site. An annual salary of $74,000 came out on average for energy risk professionals: delivers a similar picture, an average of roughly $59,000:

Again, these numbers are calculated for entry level positions with minimal experience. GARP delivers data for more experienced risk managers:

You see, as in any job, compensation is largely dependent on education and experience. In my opinion, having the Energy Risk Professional certification (ERP) under your belt can only help you rise on the pay scale, especially, as the designation will gain popularity over the years. If you consider working in energy, it also makes sense to get an early start in the field, as your experience will accumulate over the years. For more info about this topic, please also read “What can the ERP do for my career”.

If you are currently looking for a job, please also visit the ERP Job Board. In either case, I wish you all the best for your ERP exam preparation!

How To Master the ERP Exam in 10 Steps.

  1. Start preparing early, and finish early. I recommend you start reading the original study material at least 6 months before the exam. You may assemble the reading materials from the original publications instead of the GARP package. The material is exactly the same, with the exception that the GARP exam preparation package already has all the relevant chapters and papers bundled. If you do not mind to jump between chapters in a book and organizing published papers yourself, then you can find all the core readings on sites like Amazon or in your library. Make sure you have at least two months before the exam to review and solve practice questions.
  2. Take notes while reading. Instead of simply reading the textbooks you should take notes from the beginning. This will expedite your review process greatly. Memory consolidation only works if the information is repeatedly recalled (active recall), and reading alone will not make you remember the relevant concepts well enough for a challenging certification such as the ERP.
  3. Regularly review what you have learnt. Review your notes, diagrams, earmarked pages etc. every few days or at least every weekend. This will help you keep perspective and reinforce the most salient concepts.
  4. Explain to others what you have learnt. If you can, study together with other ERP candidates. This will make sense once you have read and summarized the core readings. Explain certain concepts to each other, or solve practice questions together. Who would not want to know how exactly nuclear energy works? Explain it to your parents or a patient neighbor. Discussing the concepts will greatly enhance your understanding and performance on exam day.
  5. Solve as many practice questions as possible. In order to drill the concepts, you must stimulate your brain. If it feels difficult, then it works and you are learning something. Try to find as many practice questions for the ERP exam, or if possible, enroll in a class to take a practice exam, such as the realistic ERP practice exam.
  6. Take a day off work before the exam. You should not go into overdrive right before the exam day. Take a day off, sleep enough, take a walk, or go swimming. Go to bed early and rise early. This will help you achieve peak performance during the exam.
  7. Research your exam center. Go there once before the exam, find out where parking is located, if the exam is taking place on a university campus, find out in which building it will be taken. I took the exam at UCLA. The campus is a maze stretching over several city blocks. There were no signs whatsoever. As it was early on a Saturday, there were almost no students around to ask for directions. Make sure you know where you have to be on exam day, and if you have questions, ask GARP early.
  8. Bring your own lunch. On the exam site, there may be a cafeteria, but you should bring your own lunch. You never know what they are serving, it may be crowded and you have to wait in line. Instead, prepare a healthy sandwich, find a quiet place and relax during the lunch break. Make sure you bring a beverage and snacks during the exam, as there is probably no drinking water provided in the exam room. The official statement is that there are no food or drinks allowed in the exam room, but of you quietly place a bottle of water on the floor next to your chair, nobody will complain.
  9. Do not engage in discussions about the curriculum before the exam. Save this for afterwards. The exam will be hard enough. You need all mental power you can muster, and you should not waste any energy discussing last minute questions right before the exam. This is why you should have a study group where all questions are cleared beforehand.
  10. Take it step by step during the exam. Time is usually not an issue. Solve question for question, and if you see something you did not anticipate, do not despair. Make a mark in your exam book on questions you are not certain about, and re-attempt them later. Do not leave any questions blank, always fill in an answer. You can always correct your answer later.

What Is The ERP Exam? What To Expect, And How To Prepare For It

The Energy Risk Professional (ERP) is a new professional designation from GARP aimed at risk professionals working in the physical and financial fields of energy. I was actually studying for the CAIA (Chartered Alternative Investment Analyst) and the CFA (Chartered Financial Analyst) when I became interested in energy risk management. It was intuitive to me to use energy financial instruments for risk management and hedging, but the physical aspects of the energy risk professional designation were not entirely clear to me. Still, I took the plunge and registered for the November exam in summer of 2010.

Little did I know what I had signed up for: The ERP curriculum stretched over nearly two thousand pages, consisted of over 100 readings different and academic papers, some of them very lengthy. Next to a 60 hour work week, the study material was a mountain of work. Organizing the material, summarizing it, reviewing and practicing for the exam were made even more difficult by the lack of study material and preparation resources, as only one (!) practice exam was available at the time.

The curriculum stretches from physical aspects of petroleum (hydrocarbon genesis, refining, transport with tankers, pipelines) over coal and natural gas, to alternative energy such as solar, hydro, wind, and biomass. There is also a segment of nuclear energy, financial trading instruments, valuation of energy transactions, financial disclosure, and laws and regulations. A large part of the material is electricity. The finance part was easy for me, as it covered mainly options, futures, forwards, swaps and little structured derivatives. Energy futures was a different bag altogether, but not too remote from what I already knew.

The physical aspects were much more interesting, as they contained ideas and concepts that were new to me. Even simple truths like the fact that electricity is not storable and what this means for trading electricity derivatives seem trite at first, but when you get into it further, it opens up a whole new universe.

My main challenge was reviewing and learning the study material. I had made a ton of summaries of the original readings, but how should I pack that into my head for the exam? I used a spaced repetition with my summaries in question and answer format, and that was quite effective (but not very efficient, as it ate a lot of time). In retrospect, I spent about 200 hours preparing for the exam, and passed. If this sounds like a lot, it was. There were simply no tools available at the time that I could have used for a shortcut.

If you work in the energy industry, and are involved with risk management, I encourage you to look into the Energy Risk Professional (ERP) from GARP. This designation is new, but I believe it will grow tremendously in importance over the next few years, and has the potential to help you in your career. I wish you all the best for your exam preparation!

How Will the ERP Designation Help Me to Advance My Professional Career?

A common question I get in emails is this one: “I already work in the energy industry. What will the ERP (Energy Risk Professional) designation do for me to advance my career?”

This is an obvious question often heard from energy marketers, energy commodity traders, engineers, and energy risk managers. The ERP designation is not widely known yet, but this may change soon. While the ERP (short for “Energy Risk Professional”) is relatively new, it stands on solid footing endorsed by GARP (the Global Association of Risk Professionals) and API (the American Petroleum Institute). There are approximately 500 ERP charterholders so far (as of 2010), and their number is expected to grow very quickly. The pass rate on the ERP exam has been about 35% in 2010, so this is definitely not a designation that you simply buy by enrolling for the exam. The ERP designation can be gained by passing one exam, held in May and November each year, but this may be amended in the future, just as has been the case lately with the FRM designation (short for Financial Risk Manager, also by GARP), which now spans over two exams. The time to gain the ERP designation is still relatively short with manageable effort, for the time being.

Having passed the ERP exam in the first go, I can say that the material is not too difficult. You should, however, take your exam preparation seriously: Start at least six months before the exam with the required reading material, and finish reading and summarizing the material at least two months prior to the exam, so you have ample time to review all the study materials and take practice exams.

I definitely think the ERP designation will add value to your resume if you work in the energy industry. Even if you work in related financial fields, I would advise you to consider taking the exam. The effort is not as huge as for other designations such as the CFA, CAIA, or FRM, but you will still get an endorsement from GARP and API. If you can show to prospective employers that you are willing to improve your skills, this always sends a positive signal that will differentiate you from the herd. Employers rewards achievers, so be prepared for an improvement of your professional situation upon getting any professional designation.

If you have made the decision to enroll for the ERP exam, I applaud you. This is your first step to excellence in the growing field of energy risk management. I wish you all the best for your exam preparation on the way to becoming an Energy Risk Professional!