Committee of Chief Risk Officers 8000 Research Forest Dr. info@ccro.org STE 115 #278 http://ccro.org The Woodlands, TX 77380 3 Advancing Our Energy Industry’s Risk &Compliance Best Practices Anderson: First of all, most of us by now know that the financial liquidity risks to companies in the business of transacting in LNG are pretty unbelievable. I’ve been given some examples of the amount of margin or collateral requirements that these massive positions can create. I can see that this could be an existential threat to a company in some cases. So, our LNG group is exploring what could be done to advance the understanding of financial liquidity risk associated with an LNG portfolio and what methods might make measurement and mitigation more effective. Is there attention that we could bring to methodologies or even specific mitigation instruments that would reduce the collateral burden? Is there attention that we could bring to methodologies or even specific mitigation instruments that would reduce the collateral burden? You can see here a few examples of related concepts. I know these topics are areas where CCRO members have historically enjoyed discussing alternatives and exploring potential solutions. Financial liquidity risk has for a long time been a focus area for us. Check out some of our past materials on this here… 1) Managing Financial Liquidity Risks from the LNG Business ?• Margin@Risk – a PFE-like parameter? • Compromise methods given the limitations on data &fwd curves? • Practical implementation for an LNG portfolio – are there resources available? • … • Cash requirements of margins &hedging =financial liquidity risk ?• … • Choosing transactions: Is there a trade-off between margin risk versus credit risk ?• … www.ccro.org 3