Committee of Chief Risk Officers 8000 Research Forest Dr. info@ccro.org STE 115 #278 http://ccro.org The Woodlands, TX 77380 1 Advancing Our Energy Industry’s Risk &Compliance Best Practices Anderson: Okay, let’s walk through the LNG industry situation today, and just what our LNG working group discussions are developing to address it. Bob Stibolt’s overview that we just heard painted a clear picture of a rapidly growing LNG industry with dramatically increasing trade activity. Well, this in-turn creates many challenges to risk managers facing direct or even indirect exposures to LNG. So, it’s not surprising that I’ve received a lot of requests regarding ways that we CCRO Members might work together to advance risk management of those LNG exposures. I’ve received a lot of requests regarding ways that CCRO Members might work together to advance risk management of LNG exposures. What’s the situation that has prompted this initiative? Well, there's a lot of regulatory uncertainty. Market transparency's not good. Forward curves are either non-existent or not representative. The numerous trade platforms that are out there lack liquidity. Plus, there are very limited hedge instruments available to choose from. So, despite the size of this growing LNG market that Bob was just showing you, there remain huge gaps. Gaps in terms of resources and information that's needed for a risk manager to be effective here. However, this situation also means there are great opportunities for the CCRO Member companies participating in our initiative. The Situation for LNG Risk Professionals • Rapidly growing trade activity with increasing challenges to effective risk management • Regulatory uncertainty • Market transparency weak • Forward curves not reliable • Trade platforms lack liquidity • Limited hedge instruments • Etc. • Very large transaction valuations make effective risk management a critical need… • Collateral • Trade finance • LNG Risk professionals wish to share knowledge to develop best practices • LNG Risk professionals wish to have impact by creating constructive change initiatives that will improve their situation • This is a classic situation where participation on the the CCRO platform can have the greatest value www.ccro.org 1