RESOURCESThe newsletter of the Global Energy Management Institute at the Bauer College of Business

Volume 1, Issue 1 sPRING 2007

Bauer College Upcoming EventsApril 4 FarfelLecture 5 DistinguishedLeadersSeries-John

Hofmeister,President,ShellUSA 12 CougarFundAnnualMeeting 13 NACDBreakfast 18 GLOLuncheon–Scholarships

Presentation18-19 Burgerfest 19 BauerBreakfast 20 HBSADiversityConference 26 SEIGraduationat

TheHoustonClub 27 CEOBreakfastatROCC27-28 UHAlumniCollege–HAO

MAy 1 PlannedGivingConference 10 CEIGraduationat

TheHoustonClub 10 HBSAGraduationDinner 11 MBAGraduation 12 BBAGraduation 21 BauerAlumniGolfTournament

2007 GEMI EventsOur 2007 event calendar is shaping up.Contact us at 713-743-4895 or check future issues for updates.

JAnuAry25 TradingConference:“FifthAnnual

EnergyTrading&MarketingConference”(AnnualEvent)

MArch26 Pipeline&GasJournal’s3rd

AnnualPipelineOpportunitiesConference(UHGEMI–Sponsored)

April Students’TradingCompetition:“4thOpenOutCryTradingCompetition”(AnnualEvent)

MAy Students’Competition:“3rdJ.S.HeroldEnergyAnalysisCompetition”(AnnualEvent)

RefineryBiofuelsWorkshopJune28 ThirdAnnualElectricPower

ConferenceOct/nOv2007 2ndAnnualSupply&Demand

ConferencetBA DownstreamConference:Focuson

Refineries

DearGEMIMembers,

ItgivesmegreatpleasuretosendyoutheinauguralissueofResources,GEMI’snewsletterforitsmembers.WeplantouseResourcestocommunicateregularlywithyouonawiderangeofissues.TheseincludekeepingyouabreastoftheongoingevolutioninGEMI’splans,highlightingcurrentandprospectiveinitiatives,bringingnewsofupcomingeventsinGEMIandtheBauerCollege,introducingyoutokeyBauerCollegepersonnel,joiningsubstantiveenergyrelatedissues,andshowcasingthesuccessofalumnifromoureducationalprograms.And,thisissuewillillustratethescopeofthisnewsletter.

Asmanyofyouareprobablyaware,IrecentlytookoverastheExecutiveDirectorofGEMI.Asabitofbackground—underDeanArthurWarga’sleadership,Ico-foundedGEMIin2001andwrotethebusinessplanforit;and,withthehelpofotherfaculty,IdesignedtheEnergyRiskManagement(ERM)CertificateandtheundergraduateGEMtrack—bothofthesehavebeenverysuccessful.PartofmyinspirationforGEMIwas(andremains)theimportantroleStanfordUniversityplaysinthehi-techindustry,someofwhichIsawfirsthandwhilecompletingmygraduateworkthere.IwouldliketothankLaneSloanforhiseffortsandvisioninguidingGEMIinthelastfewyears.

BauerCollegeandGEMIareabsolutelycommittedtobecomingtheproviderofworld-classenergyprogramsforgraduatebusinessstudents,andwe

havemadesubstantialprogresstothatend.Onpage7inthisissue,youwillfindthecontentoffournewgraduateenergycertificates,appealingtoawide-rangeofbackgroundsandinterestsintheenergyindustry,andavailabletonon-degreestudents.Ourfocusnowistoenhancethevalueweprovidetoourmembersandto

increaseourinteractionwiththeenergyindustry.

WewouldliketointegrateourmemberstothefabricofourCollege,sothattheycanparticipateintheexcitingthingsgoingoninBauerCollege(e.g.,thefinancedepartmentwasrecentlyranked#8inthecountryfortheresearchproductivityofitsfaculty).Thisincludesnotonlyeasieraccesstomeetingandrecruitingstudents,butalsogreaterintellectualengagementbyfrequentworkshopsonchallengingissues,withtheparticipationoffacultyandindustryexperts.Here,weplantobuildonoursuccessfulconferences.TheGEMIboardenthusiasticallyendorsedtheseplansinourmeetingonFebruary6.YouwillfindinformationinthisnewsletteronfutureGEMIandBauerCollegeevents.WehavealsoprovidedcontactdetailsforimportantpeopleintheCollege.Pleasedropmeane-mail(pkumar@uh.edu)withyoursuggestionsonhowwecanenhancethevalueGEMIprovidesforyou.

IlookforwardtoworkingwithyoutotakeGEMItothenextlevel.

Bestregards,PraveenKumarTexas Commerce Bank/Tenneco ProfessorChair, Department of Finance713-743-4770

From the Executive Director

IN THIS ISSUE:

Praveen Kumar

Page 2 Market Commentary:TheFutureoftheGulfCoastRefiningIndustry

Page 5 Around GEMI:2007TradingandMarketingConference

Page 6 Did you know?:GraduateCertificatesinEnergy

ResouRces • Vol. 1, No. 1 • Page �

MaRKeT Commentary

The Case for New Investment

The case for new investment in Gulf Coast refining hasto overcome a multi-decade legacy of poor financial

performance. Refining’s financial performance indices, suchas gross margin per product barrel and Return on CapitalEmployed(ROCE)suggestanindustrythathasstruggledforoverthreedecadestoearnitscostofcapital.Thisconditionled to the drying up of major expansion projects. WhileU.S.refiningcapacitydidgrowvia ‘creep’expansions, largeincrementsofnewcapacitywerenotadded.The lastmajorU.S.refiningexpansionoccurredintheearly1980’s.SolongasdemandforU.S.motorfuelswasonlygrowingat1-2%p.a.,creepexpansionwassufficienttomaintainabalancedorevenasurplusofrefiningcapacityintheNorthAmericanmarket.This was the condition that prevailed from the mid-1980’suntil2003.Periodically itwasworsenedbyboutsofglobalsparecapacity,suchascharacterizedAsiafrom1997through2002.

TheNorthAmericanmarketisthepropercontextwithinwhichtoanalyzetheconditionoftheGulfCoastindustry.Thismarket comprises not only U.S. refineries, but also CanadaandMexico,plusexportrefineriesintheCaribbean(Aruba,Curacao, St. Croix) and Venezuela. The U.S. Refining &Marketing industry optimizes economics across all of theserefineriesandincorporatesimportedgasolineandcrackerfeedfrommoredistantlocationswhenitiseconomictodoso.The‘steadystate’positionoftheGulfCoastduringthelate1980’sand1990’swasasituationwiththefollowingcharacteristics:•CanadianrefineriesexportedproducttotheU.S.•MexicoimportedproductsfromtheU.S.GulfCoast•EastCoastU.S.importedgasolinefromEurope•GulfCoast&EastCoastrefineriesimportedcrackerfeeds

fromtheCaribbeanandEurope• West Coast markets imported small amounts of product

fromAsianrefineries•ThepresenceofeconomicproductimportsfromCaribbean/

Venezuelan refineries and from Europe left Gulf CoastrefinerswithachroniclayerofsparecapacityConsequently, U.S. refining margins for simple

(hydroskimming)plants averaged less than$3/b*,which isnot sufficient to earn a double digit ROCE for an averagecost industryplayer.Duringthisperiod,GulfCoastrefiners

became impressed with the fragile structure of industrymargins. Relatively small amounts of spare capacity seemedrepeatedlytoengenderdestructivepricecompetition;thiswasespeciallysoamongrefinerswithsimilarcoststructures,butrefinerswithleadingscaleandcomplexitywerealsoadverselyimpacted.

Several factors accounted for the fragility of refiningmargins.Refinersfoundthemselvescontinuouslyconfrontedwith the ‘tyrannyofmarginal economics’.Facedwith sparecapacityandprevailingpricesthatofferedpositivecashmarginsrelativetomarginalcost,refinersconstantlyweretemptedtomaximizetheirownproduction.Thecumulativeeffectwastocreate surplus supplies that encouragedbuyers to pit sellersagainst each other. This tendency towards destructive pricecompetitionwasthenintensifiedbycustomers’actions;overtimeretailers,distributorsandindustrialcustomersdevelopedpotentmeanstoconsolidatebuyingpower.ThiswasespeciallythecasewithdiscountretailerssuchasRacewayandalsowith‘bigbox’andhyper-marketerswhodecidedtoinstallgaspumpsasameansofattractingmotoriststotheirstores.Refinersfoundthemselvesfacinglargerandmorefrequentauctionsituationsforthedisposaloftheirmarginalproduction.Theseauctionssetlowprices,whichanincreasingpricetransparencyrapidlycommunicatedthroughoutthemarket.AchronicconditionofpoorstructuralprofitabilityforU.S.refinerswastheresult.

In a broader context, massive expansions of refiningcapacitytookplaceintheprotectedmarketsofIndia,ThailandandKoreainthemid-1990s.Whenthe“Asianflu”infectedAsianeconomiesinthelate1990s,sparecapacityinAsiawerediffusedglobally, infectingmarginsfirst in theMiddleEast,thenontoEuropeandfinally,throughincreasedavailabilityofEuropeanproductforUSmarkets,ontotheGulfCoast.

ThecombinationofpoorU.S. refining results andevenmore severe conditions outside this hemisphere helpedrefashionedsupplypatterns intoNorthAmerica.Starting inthemid-1990’s,U.S.motorfuelsdemandbegantoaccelerate.WithminimalnewcapacityappearingontheGulfCoastandbuyers geared to find cheap product from any source, thevolumeofproduct importsbegan to swell.Tightening fuelspecificationsandthelegislatedwithdrawalofMTBEfromthemarketfurtherreducedtheavailablevolumeandfungibilityofGulfCoastproduction.Relianceonrefinedproductimports

This paper summarizes a general hypothesis regarding the ‘Case for New Investment’ in the Gulf Coast Refining Industry.ThebasichypothesisisthatestablishedparticipantsintheGulfCoastRefiningIndustryconsidertheirbusinesstohaveafragileprofitabilitystructure.Consequently,theindustryapproachesthecasefornewinvestmentwithawell-foundedcaution.NewGulfCoastrefininginvestmentwillthusbelimited,theproductofspecificcircumstances,suchas:1)changesinthecrudesupplybarrel;2)expansionstrategiesbyforeignplayers;or3)integratedinvestmentstiedtoupstreamheavycrudeproduction.ThishypothesisalsopointstopotentialdifficultiesfortheU.S.economyonfuelsupplysecurity.TheU.S.economyhasbecome,andwillremain,partiallydependentonimportedproductsuppliesfromdistantlocations.Thissituationinvolvesphysicalsupplysecurityandpricerisksthatthepublicsectorwillhavetoaddress.

Continued on page 3

TheFutureoftheGulfCoastRefiningIndustry‘RefeRence case’ statement, stephen V. aRbogast, executiVe pRofessoR, uh-gemi

ResouRces • Vol. 1, No. 1 • Page �

thusintensifiedfurther.Whilethelate1990’sweredifficultforGulfCoastrefiners,

thedifficultiesnotedabovealsowerelayingthegroundworkforarecovery.BecauseofthepresenceofimportsfromCaribbeanrefineries, the North American market already possessed an‘import-parity’ structure. Within such structures, importedproducttendstosetpricesforthewholemarket.Thisstructurebenefits domestic refiners by setting prices at levels adequatetopayfortransportationfrommoredistantlocations.SolongasthemarginalimportsourcewasVenezuelaorCuracao,this‘transportation differential’ was relatively small. However, asU.S.demandgrewinthe1990’s,growingvolumesofimportedproductbegantoarrivefrommoredistantsources.Thisdevelopedfirstonthewestcoast.Constrainedbytightenvironmentalrulesandgearedeconomically to runonlyAlaskanandCaliforniancrude,westcoastrefinershadexpandedminimally;thismarketislogisticallyremotefromtheCaribbeanandnotwellconnectedbypipelinetotheGulfCoast.Asaresult,productsfromAsianrefineriesbegan to arrive into thishighly constrainedmarket.Westcoastpricesrosetolevelsthatwouldattractlongdistanceimportsintoabottleneckedlogisticalstructure;unsurprisingly,westcoastpricesalsoreachedlevelswellabovethose inotherU.S.regions.

What happened first on the west coast became a moregeneral phenomenon by 2003. Transportation fuel productdemandwasnowgrowingat3-4%p.a.FirsteastcoastandthenGulfCoastrefiningfounditssparecapacitysoppedup.Productand residual fuel imports from Western and Eastern Europe,RussiaandevenNorthAfricabegantoaccelerate.MeanwhileproductdemandgrowthinIndiaand China was accelerating,consuming Asian spare capacity,and reversing trends that hadweakenedglobalrefiningmarginsin the 1990s. This transitionto import-parity and minimaldomestic spare capacity had anespecially significant effect onheavy crude economics. Ownersof complex refineries found thatin a tight crude supply market,less-complex refineries wereforced to compete for a finitepool of light sweet crudes theirsitescouldprocess.Thishadtheeffectofdrivinglightcrudepricesuprelativetoheaviercrudes;thiswasmostnotableforglobalbenchmark crudes like WTI and Brent. What spare crudeproduction capacity remained in the global supply chain wasnowheavyand/or sour.Complex refiners—thosewhose sitespossessedamplecatalyticcrackers,hydrocrackersandcokers—discoveredpricediscountsforheavy/sourcrudesreachinglargeandevenrecordlevelsversusthebenchmarkcrudes.Thisgavecomplex refinersevery incentive to run theirconversionunitsfull, until U.S. conversion capacity became fully utilized.Theeffectsofthesemarketchangeswerethreefold:•Themarginalsupplysituationbecameasfollows:heavy/sour

crude production was spare, but mismatched against less-

complex spare refining capacity• Less-complex refineries bidding for light/sweet crudes

became the marginal supply source and thus the market price setting mechanism

• Consequently, complex refining profitability soared, as light/heavy crude differentials and clean/dirty spreads widened to levels not seen in decadesItwasthisconfigurationofmarketeventswhichprompted

Saudi spokesmen to argue that ‘refining bottlenecks’ were amajorcauseofthehighcrudepricesandresultingmotorfuelsprices. This diagnosis was spelled out by Dr. Adnan Shihab-Eldin, writing on behalf of the OPEC Secretary General inWorld Energy Magazine,Volume8,Number2,2005:

“Now the focus is on downstream, where growth in refining capacity lags behind demand, leading to bottlenecks…downstream investment is primarily the responsibility of the consuming countries and international oil companies (IOC’s). The recent large revenue increases in the IOC’s over the last two years have not yet been visibly translated into substantial additional investments, particularly in the downstream. On Sept. 25, 2005, the Washington Post indicated that the United States, as a result of the most recent increase in the price of gasoline, crude producers are gaining around 45% over their take of the year before, while refiners have gained more than 250% in the same period. While this may, indeed, be a ‘snapshot’ in one location on a particular day, the overall picture nevertheless remains valid.”Distilledtoitsessence,theSaudicommentsattributemuchof

theresponsibilityforhighbenchmarkcrudepricestotheIOC’sreluctancetoinvestinneededrefiningcapacity.Clearly,anysuchassessment would encompass the large refining concentration

on the U.S. Gulf Coast. Inresponse to such a critique,the IOC’s would likelymake the following rebuttalpoints:• Although new grassrootsfacilities have not beenbuilt, U.S. Gulf Coastrefining capacity has beencontinuously expanded.Moreover, this ‘creep’expansion will not onlycontinue, but is possiblyaccelerating as some majorexpansions have beenannounced.• It is appropriate for the

industry to be careful not to overbuild. Bitter experiencehasshownhoweasyitisfortheindustrytomiscalculatetheamountof capacityneeded and todiscover, yet again, thatrelatively small miscalculations have large adverse marginimpacts.

•Andfinally,timeshouldbeallowedforthemarkettowork.Indeed,highpricesarealreadyworkingtodampendemandandencourage technologyandadaptations thatwill reducetheneedfornewrefiningcapacity.Saiddifferently,theIOC’swouldarguethattheU.S.energy

market is very dynamic. High prices are already encouragingContinued on page 4

Market Commentary continued from page 3

ResouRces • Vol. 1, No. 1 • Page �

motorists to think about both better mileage vehicles andshifting from gasoline to diesel, hybrids or bio-fuels. It is abravemarketforecasterwho, inthefaceofallthese‘movingparts’, believeshe can assess thenetdemand for gasoline in2016.Yetitisexactlythatkindofenergyforecastwhichwouldbe relevant to the economics of a major refinery expansionprojectlaunchedtoday.

WhiletheIOC’smayhavevalidforecastingandeconomicreasonsforexercisingcaution,theirreluctancetoinvest

does leave the U.S. economy more dependent on productimports from more distant locations. It also leaves thesame economy highly dependent on the existing industry’sconcentrationontheGulfCoast.Arethesestructuralexposuresseriousrisksormerelytheglobalenergymarketatwork?

The hypothesis here is as follows: if it is accepted thatbottlenecksinU.S.refiningandconversioncapacitycurrentlycontributetohighcrudeprices,thenitfollowsthatthissamesituation exposes the general economy to both potentialsupplyshocksandevenhigherprices.Thespecificsbehindthishypothesisarethefollowing.Dependenceonforeignrefiningcapacity located outside the North American tributary zonemeansdependenceoncapacitywhichis:a)notexclusivelydedicatedtothismarket,andthereforemay

beunavailableif/whenaUSemergencyneedarises;b)ispartiallylocatedincountrieseitherpronetopoliticalrisks

(MiddleEast)orwhoseforeignpoliciesmaynotbealignedwithAmerica’s(Russia);and

c)isinthehandsofcompanieswhoregardtheUSasa‘swing’market, rather than one for which capacity is coordinatedandcustomizedThustherisksarerealthatwhen/ifasupplyshockoccurs

intheUS,compensatorysupplieseithermaynotbeavailablein the form needed for this market or may not be availableat all. Having said this, it must be acknowledged that theUS industryhandled theKatrina supply shockwithminimaldisruption. Adequate import supplies were organized andreroutedinatimelymannertotheeastcoastmarket.However,successinthiscaseisnoguaranteethattheexposuresjustnotedwillnotcontinuetointensify,therebybecomingmoreseriousconstraintsinthenextsupplycrisis.

TheU.S.hasfordecadeshedgeditsexposuretoacrudeoilsupplyshockbycompilingaStrategicPetroleumReserve.Nosuchreserveexistsinrefinedproducts.IftheU.S.continuestobeshortofrefiningcapacity,noamountofcrudeoil reservewill compensate foramajor refiningoutage.ThecrudemaybeinTexasandLouisiana,buttheavailablerefiningcapacitywillbeoverseas.Thiswindowofvulnerabilityonfuelproductsupplymaybefinite.Theindustryisprobablyrightthathighpriceswillworktheiradjustmentprocessovertime.In-roadsfromethanolmaycombinewithflatteningdemandandsomemajorU.S.refiningexpansionstorestoreamorecomfortableposition down the road. Already there is evidence of somerefinersmovingtoexpandfacilitiesonthebasisofintegratedeconomicswithnewheavycrudeproduction.Petrobrasbought

intoaPasadenarefineryrecentlywiththeannouncedintentionofdoublingitscapacitytoaccommodateheavycrudeimportsfrom Brazil. ConocoPhillips followed this by announcing ajointventurewithEncanathatwillchannelnewCanadiantarsandsproductionintotwoupgradedmid-westrefineries.Thesedevelopmentscouldbe the leadingedgeofamorecompleteadjustmentprocess.

For the moment however, the U.S. has an exposure.Congressisawareofitandhasbeguntoconsideroptionsforhedgingbothfuelproductsupplyandpricerisks.Amongtheoptionsunderconsiderationare:•Usingtermcontractsforthepurchaseoffuelforthemilitary

tofostertheconstructionofnewrefiningcapacity,and•SomeformofStrategicFuelProductReserve

OutsidethehallsofCongress,variousjournalists,consultantsandacademicshavecalledforsignificantincreasesinmotorfuelsales taxes (with proceeds going to fund a Strategic Reserveand/or subsidies or price supports for alternative energyfacilities)andsuchstepsasthereductionintariffsonimportedethanol and/or reducing the excise tax break on domesticethanol.Theselatteractions,whilelikelyunpopularinfarmbeltstates,wouldstrengthentheopportunityforCaribbeansugarislands to enter the ethanol export business. Whether anyofthese is agoodoption for improving supply security remainsto be proven. Surveying all the potential changes that coulddivert current trends innewdirections,one is inclined tobemore understanding of the refining industry’s caution. Thenumberofmovingpartsis large.Theindustry’sabilitytoseehow they will settle out is limited. The weight of history isconsiderable–ahistoryremindingtheindustrythathighpricestypicallyleadtoflatdemand,oversupplyandpoormarginsforextendedperiods.Publicpolicyshouldprobablybedevelopedbasedontheassumptionthattheindustrywillremaincautious;mostlikely,theGulfCoastindustrywillonlybuildsuchcapacityasitabsolutelyneedstoaccommodatechangingcrudequalityandproduct specificationsorwhoseeconomics aredrivenbyintegration with production upstream. Those responsiblefor the U.S. economy should not assume that the industry’snaturaldynamicswillclosethewindowofsupplyvulnerabilityin thenext coupleof years.On theotherhand, they shouldrememberthemistakesofill-judgedlegislationinthepastsuchasthewastefulandineffectivesmallrefinerbiasofthe1970s.ThusthereisroomforpublicpolicytosupplementwhatU.S.refinerswillaccomplishontheirown.Whetherthatactionwillbetimelyoreffectiveneedstobeexaminedandremainstobedetermined.

*exact hydroskimming margins varied materially by individual producer depending upon their disposition alternatives for residual fuel oil.

(This hypothesis was intended to provide a starting point for discussions attheNovember3,2006UH-GEMIConference,andwasnotputforwardasafinishedproductofacademicresearch.)

The Risks of Dependence on Imported Products

Market Commentary continued from page 4

ResouRces • Vol. 1, No. 1 • Page �

AluMNI PRoFIlEJason Ho(’92&MBA’99)

Principal Analyst, Corporate Investment Evaluation/ Market Planning, Exelon Corp, Chicago

JasonHoisadistinguishedalumnusoftheBauerCollegeandamemberofthefirstEnergyRiskManagementCertificateclass.HeiscurrentlyPrincipalAnalyst,

CorporateInvestmentEvaluation/MarketPlanning,withExelonCorporationinChicago.

Around GEMI

Withthepriceofgasolineafixtureinthenews,andgrowingconcernovertheescalatingworldwidedemand

foroilandgas,thetopicofthisyear’sEnergyTrading&MarketingConferencewasatimelyone:speculationinenergymarkets.Thefifthannualconference,presentedbytheUniversityofHouston’sGlobalEnergyManagementInstitute(GEMI),washeldonJanuary25inHouston,andprovidedabout100localenergyprofessionalsanopportunitytoheartheinsightsofanumberofnationwideexperts.

“Almostsincecommoditiesexisted,”saysconferencemoderatorandBauerCollegeofBusinessProfessorCraigPirrong,“therehasbeenconcernoverthepotentialforspeculationtohaveanadverseimpactonconsumerprices.Thisisanissuethatcutsacrosseconomic,technologicalandevenpoliticalboundaries.”Onerecentfinancialanalysis

GEMIbringsenergytradingexpertstotown—again

Continued on page �

AtExelon,JasonhasledaninitiativeinembeddingRealOptionsAnalysistechniquesintothecorporate-wideinvestmentevaluationprocess,andactedasasubjectmatterexpertinevaluatingmodelsthatarerelatedtoelectricity,fuelsandemissionsmarkets.

JasonobtainedhisEnergyRiskManagementCertificatein2003andofferedthistestimonialabouttheprogram:“TheEnergyRiskManagementprogramatGEMIisoneofthebestinvestmentsIhaveevermade—lowrisk,highreturn,andlotsofembeddedstrategicoptions!Itisagreatprogramthatenhancesknowledgebuilding,professionalnetworkingandcareeradvancement.”

Trading and Marketing Conference attendees heard from a host of experts.

From left, Michael Cosgrove, amerex energy President and conference speaker, chats with Jeremy Grant,

U.S. Financial Correspondent with the Financial Times.

concludedthatspeculationinenergyfutureshadadded$35tothepriceofabarrelofoilinthepastthreeyears.Ontheotherhand,themoreclassiceconomicanalysiswouldsuggestthatspeculationinfuturesmarketsisreallyjustamethodforinvestorstoearnareturnandforproducerstohedgetheirrisksoffuturepricevolatility.“Asyoumightexpect,”saysPirrong,“thisisacomplexissue,andthereisnoconclusiveanswerrightnow.”

Theconferencewasdesignedasaneutralforum,andsothehalf-daymeetingconsistedofanaddressandbriefQ&Asessionbyeachspeaker.Speakersincludedexecutivesfromthelegal,regulatory,legislativeandtradingareas.

“I’veattendedfourofthesemeetings,andspokenatthelasttwo,”saysAmerexPresidentMichaelCosgrove,“andit’sanextremelyimportantmeeting—bothforourcompany

andforthewholeenergycommunity.Itprovidesanexceptionalopportunityforustoheartheperspectivesofpeoplewhoseopinionsanddecisionswillaffectthefutureofourindustry.Italsoprovidesaplatformforpolicymakerstomakestatementsthatclarifyimportantissues.Forexample,whileitisnotsurprisingtolearnthattheCFTC’sfundinghasbeeninsufficienttoitsmandate,hearingWalterLukkenspeakspecifically

tothisissuebringsthematterintoanimportant,sharpfocus.”

TheEnergyTrading&MarketingConferencebeganinthewakeoftheEnronscandal,whenpublicconfidenceintheenergymarketswassolowthattheirfuturewasin

ResouRces • Vol. 1, No. 1 • Page �

Recruiting teams from Shell, Pride, and Spectra energy were among the numerous energy industry companies who recently participated in Bauer College’s Spring Career Fair presented by the Rockwell Career Services Center on February 22.

A panel of expertsGEMI’s5thannualEnergyTrading&MarketingConferencefeaturedaslateofspeakerswithexceptionalexpertise:

George BakerPrincipal Williams & Jensen (ThisWashington,D.C.lawfirmhasbroadexpertiseinlobbying.)

Dan BerkovitzStaffSenate Permanent Subcommittee on Investigations

Michael CosgrovePresidentamerex Brokers LLC (Amerexisoneoftheoldestandlargestover-the-counterenergybrokersintheworld.)

Kyle DickardManaging Director of Commodity analyticsMerrill Lynch

Walter LukkenCommissioner of the Commodity Futures Trading Commission (CFTC)

Todd MullinsBranch ChiefInvestigations for Division of Investigations, Office of enforcement, Federal energy Regulatory Commission

Jonathan ShortSenior Vice President InterContinental exchange (TheExchangeoperatestheleadingglobal,electronicmarketplacefortradingbothfuturesandover-the-counterenergycontracts.)

doubt.“Sincethen,”saysPirrong,“thelandscapehaschangedconsiderably.Asaresultofdramaticallyimprovedfinancialcontrols,clearingisnottheproblemitoncewas,andinvestmenthasreturned.Infact,it’sbeenfairlyrobust,withasignificantincreaseinthenumberofenergyhedgefunds.Doesthiskindofspeculationinfluencethepriceatthepump?Ofcourseitdoes,buttherealquestionsarehowmuch,andinwhatways.”Judgingbythetoneofthepresentations,itappearsthatthemajorimpacttodayisclosertowhataneconomicanalysiswouldsuggest—energyfuturestradingprovidesinvestorswithamarkettheycantrust,andoilandgasproducerswithawaytoprotectthemselvesagainstfuturedramaticpricefluctuationsoverwhichtheyhavelittlecontrol.

“However,”sayPirrong,“thedebatecontinues.Ourintenthasbeentoserveasacatalystforcommunicationanddiscussionoftheissues.Iftherewereafinalanswer,therewouldbenoneedforconferenceslikethisone.”

TheBauerCollegeofBusiness’sGlobalEnergyManagementInstitutehoststhreeothermajorenergyindustryconferenceseachyear—onpower,upstream(oilandgasexplorationandproduction),anddownstream(oilandgasrefininganddistribution).“Houstonistheworld’senergycapital,andweconsideritbothaprivilegeandaresponsibilitytoengageworldwideenergyleadersinanongoingdialogue,”saysBauerCollegeDepartmentofFinanceChairmanPraveenKumar.“Initsrelativelyshortfive-yearhistory,theEnergyTrading&MarketingConferencehasalreadyestablisheditsreputation,drawingtopspeakers,growingattendanceandinternationalmediaattention.”

ResouRces • Vol. 1, No. 1 • Page �

Did you know...?

TheC.T.BauerCollegeofBusinessispleasedtoofferfourgraduatecertificatesinenergy:· Energy Investment Analysis · Economics of Energy Value Chain · Energy Risk Management · Energy Accounting & Finance

Thesecertificatesarecarefullydesignedtoappealtostudentswithawiderangeofbackgroundsandinterestsintheenergyindustry.Forexample,thesecertificatesallowstudentsto:

·Developsuperiorinsightintotheeconomicsofenergyindustrycapitalprojects·Developabroadeconomicperspectiveontheenergybusiness·Becomeexpertinthefinancialcontrolandmanagementofenergyfirms·Prepareforacareerinenergyriskmanagementorenergytrading

Thesecertificatesarecomprisedofthree-foursemester-long(15weeks)advancedenergycourses.TheyaretaughtbyacombinationofregularBauerfacultyandadjunctfacultydrawnfromseniorexecutivesintheenergyindustry.Thecertificatesandtheirassociatedcoursesaredescribedbelow.

StudentstakingthecertificateswilltypicallybeenrolledinaBauerdegreeprogram—suchastheEnergyMBAortheMastersProgramsinFinanceandAccounting.(Abriefdescriptionoftheseprogramsisalsogivenbelow).However,non-degreestudentscanalsoenrollforthesecertificatesthroughtheBauerCenterforExecutiveDevelopment(CED).Suchstudentswillhavetodemonstratepreparationinbasicaccounting,economics,finance,andstatistics.

For more information, the contacts are: Degree stuDents:Dr.LathaRamchand(ramchand@uh.edu) non-Degree stuDents:Mr.DanCurrie(dcurrie@uh.edu)

Energy Investment Analysis (EIA)Studentsinterestedindevelopingsuperiorinsightintotheeconomicsofenergyindustrycapitalprojectsshouldconsider

thiscertificate.Studentscurrentlyworkinginorinterestedinworkinginprojectdevelopment,strategicplanning,mergersandacquisitions,capitalbudgeting,businessunitmanagementorenergysecurityanalysisshouldfindthiscertificatehelpfultocareerdevelopment.

The Economics of the Energy Value Chain (EVC)Studentsinterestedindevelopingabroadeconomicperspectiveontheenergybusinessshouldconsiderthiscertificate.The

coursesofferedshouldbeveryhelpfultoengineersandotherfunctionalspecialistsseekingtodevelopmanagerialperspectivesuitableforexecutiveresponsibilities

Energy Accounting & Finance (EAF)Studentswhowishtobecomeexpertinthefinancialcontrolandmanagementofenergyfirmsshouldconsiderthiscertificate.

ThecoursesofferedshouldbenefitprofessionalsintheTreasuryandControllersfunctionsandthoseaspiringtoaCFOpositionforanenergyfirm.

Energy Risk Management (ERM)Studentsconsideringacareerinenergyriskmanagementorenergytradingwillbenefitfromthiscertificate.Materialfrom

thecoursesinthecertificateishighlyusefultothoseinfrontoffice,mid-office,orbackofficepositionsinenergytradingfirms,orfirmsthatuseenergyderivativestomanagepriceandquantityriskexposure.Thiscertificateisalsohighlyrelevanttothose

GRADUATECERTIFICATESINENERGY

EnErGy CErTIfICATEsEnErGy InVEsTMEnT

AnALysIsECOnOMICs Of THE EnErGy VALUE CHAIn

EnErGy ACCOUnTInG & fInAnCE

EnErGy rIsK MAnAGEMEnT

Courses strategy of Project finance

The Energy Value Chain International Energy The Energy Value Chain

Competitive strategy and real Options in Energy

Upstream Economics Oil and Gas Accounting financial Engineering and Energy Derivatives

Techniques of Project finance

Downstream/Petrochemical Economics

strategy of Project finance Quantifying and Hedging Energy Price risk

Energy Trading

Possible Career paths

CfO, Energy Analyst Engineers seeking to transition to management, CEOs

Treasurer, Controller risk manager, Energy Trader

Continued on page 8

GEMIadvISory board

George AlcornPresident, alcorn exploration Inc.

Gerald BalboaVice President BP Gas & Power North america

Ed Bellexecutive Vice President StratCom advisors LLC

J. Robert (Bo) Collins, Jr.President & CeO, Mother Rock

Chris ConwayPresident Commercial Gas & Power ConocoPhillips

Randy CurryPresident, Chevron Natural Gas

Patrick French Senior Vice President Texas alliance of energy Producers

C. Gregory HarperGroup Vice President, Duke energy

Vince KaminskiManaging Director, Rice

Fran Keeth President, Shell Chemical (retired December 200�)

Richard LoomisWorld energy Magazine

Deniese Palmer-Huggins President and CeO, Sun Coast Resources, Inc.

Donna Pederson McGinnisVice President, Underwriting, aeGIS Insurance

Brett Perlman Former Commissioner Texas Public Utility Commission

John Podrazaafrica Group Controller exxonMobil Corporation

Michael ProkopVice President, amerex

Christopher Ross Senior Vice President, CRa International

Thomas Seitz Principal, McKinsey & Company

Art SmithPresident & CeO, J.S. Herold

Bill Swanstrom Partner, Locke Lidell & Sapp

Michael TrevinoMarathon Oil Company

Peter TumminelloVice President, aGL Resources

C. John Wilder President & CeO, TXU energy

CONTACT US C.T.BauerCollegeOfBusiness•GlobalEnergyManagementInstitute•334MelcherHall•713-743-4885uhgemi@uh.edu • bauer.uh.edu/UHGEMI

Did you know...?whoaspiretoadvanceinthefinancefunctioninenergyfirmsorfinancialinstitutionsthatparticipateinenergymarkets.Itprovidesathoroughgroundinginthesourcesofenergyrisk,thebehaviorofenergyprices,thetoolsandmarketsavailabletomanageenergypriceandquantityrisks,thevaluationofenergyriskmanagementtools,thequantificationofenergypricerisk,andtheuseoffinancialinstrumentsandderivativestomanagethisrisk.

GraduateDegreeProgramsattheBauerCollegeofBusinessThe Bauer MBA : The Energy MBA

TherehasneverbeenabettertimetopursueacareerintheEnergyIndustry.Awaveofmanagementtalentisnearingretirementageandthepipelineofnewworkerscannotfullyreplaceretiringenergyemployees.Challengingopportunitieswillaboundforthosewiththeskillsandpositioningtotaketheirplaceinthiscriticalpartofoureconomy.ThisisallthemorerelevantinHouston,theenergycapitaloftheworld.So,theBauerCollegethroughtheirGlobalEnergyManagementInstitute(GEMI)hasputtogetherEnergyModulesofstudyintheMBAprogramthatcombineacademicrigorwithindustryrelevance.Inshort,ifyouforeseeacareerinEnergy,theBauerMBAistheplacetobe.

Masters in Finance (MSF)Overthelastdecade,financeprofessionalshavefacedanincreasinglycomplexand

technicalworldwiththeadventofatremendousnumberofnew“exotic”securities,theexplosionintheoptionsandfuturesmarkets!,theincreaseinfinancialglobalization,andtheincreasedvolatilityinequityandcurrencymarkets.Thishasgeneratedademandforafocused,intensivecourseofstudyinthetechnicalaspectsofsecurityvaluation,tradingstrategies,hedging,andcorporatereorganization.ThisdemandhasgivenrisetotheMasterofScienceinFinanceProgramattheC.T.BauerCollegeofBusiness.

Theprogramprovidesstudentswithafocused,technicalcertificateinthefinanceareatohelpgraduatesdealwiththeincreasinglycomplexworldofFinance.TheMastersofScienceinFinanceisafullyaccreditedgraduateprogramintheUHBauerCollegeofBusiness.Theprogram’sobjectiveistoprovideparticipantswithafocusedcourseofstudythatwillenhancetheirunderstandingoftheprinciplesandpracticeoffinance.Thiswillenableparticipantstodealmorereadilywiththeincreasinglycomplexconceptsandbodyofknowledgefacedbyfinanceprofessionals.Theprogramwouldbeparticularlyrelevanttothoseworkingin,orplanningtoworkinthefollowingareas:commercialandretailbanking;investmentbanking;securityanalysisandbrokerage;corporatefinance,venturecapitalandcorporaterestructuring;securitytradingandriskmanagement;andfinancialconsulting.

Masters Program in Accounting (MPA)TheMPAprogramisforstudentswhohaveabachelor’sdegreeinaccountingorin

otherdisciplines.GraduatesreceivetheMasterofScienceinAccountancydegreeandareacademicallyeligibletotaketheCPAexam.Theprogramisfor36–72hoursdependinguponpreviouseducation.It’slearninggoalsare: I. theabilitytorecognizedysfunctionalaccountingsituations, II. thecapacitytoengageinaccountingresearchandcommunicatefindingsinaclear

andconcisemanner, III. theskillsrequiredtoworkasamemberofaprofessionalteambycoordinating

actionsandeffortstosolveaccountingproblems, IV. anoverallunderstandingofaccountingandfinancialconcepts,and V. thecapacitytorecognizeandrespondappropriatelytoethicalandregulatory

dilemmas.

ResouRces • Vol. 1, No. 1 • Page �

ConTACTSglobal eneRgy management institute

Praveen KumarTexasCommerceBank/TennecoProfessorChair,DepartmentofFinancepkumar@uh.edu713-743-4770

Avani DaveEventCoordinatorajdave@uh.edu713.743.4895

exteRnal Relations

Robert CaseyAssociateDeanDirectorofExternalRelationsbobcasey@uh.edu713-743-4624

John O’DellDirector,AlumniDevelopmentjwodell@uh.edu713-743-4457

Lisa JollyCorporateDirectorofDevelopmentlajolly@uh.edu713-743-4716

Erika GuerraExecutiveSecretary,ExternalRelationsEguerra4@uh.edu713-743-4626

gRaduate and pRofessional pRogRams

Latha RamchandAssociateDean,GraduateandProfessionalProgramsramchand@uh.edu713-743-4769

Dan CurrieExecutiveDirector,CentersandInstitutesdcurrie@uh.edu713-743-4806

Michelle PoullardProgramDirector–GraduateandProfessionalProgramsmpoullard@uh.edu713-743-4631

Rockwell caReeR seRVices centeR

Jamie BelinneExecutiveDirector,RockwellCareerServicesCenterjbelinne@uh.edu713-743-4915

Dawn ButlerStudentLeadershipCoordinator,RockwellCareerCenterdbutler@bauer.uh.edu713-743-4709(forassistancewithcontactingstudentorganizations)

Brett HobbyAssistantDirector,EmployerServicesandRecruitmentRockwellCareerServicesCenterbhobby@uh.edu713-743-8129

undeRgRaduate business pRogRams

Frank KelleyAssistantDean,UndergraduateBusinessProgramsfwkelley@uh.edu(713)743-4912

Natalie MerrittFinanceandGEMAcademicAdvisornmerritt@uh.edu(713)743-4792

UndergraduateProgramsinGlobalEnergyManagement

TheBauerCollegeofBusinessoffersauniqueGlobalEnergyManagement(GEM)programforundergraduates.Thisprogramisdesignedtoeducatethefutureleadersoftheenergyindustry.Theprogramhasthreeoptions: 1–GEMProfessionalProgram

2–GEMtrackinFinance3–GEMminor

Thecurriculumforeachoptionhasbeendesignedtoblendatechnicalbackground,notunlikethebasisforanengineeringdegree,withthemanagementskillsmissinginmostenergyworkerstoday.Thisblendedapproachresultsinamuchmoreappealingcandidatefortheenergyindustry.Eachoptionoffersaspecialfocusonenergyrelatedcoursesattheadvancedlevel.

TheGEMProfessionalProgramisthemostpowerfulandcomprehensiveblendoftechnicalandbusinessskillsavailableattheundergraduateandgraduatelevel.Studentsinthis5-yearprogramobtainaBBAinFinancewithaGEMspecialization,EnergyRiskManagement(ERM)certification,andanMSinFinance.Meanttobeginatthefreshmanyearandcarrythroughgraduation,theGEMProfessionalProgramrequiresahigherlevelmathandsciencecorethanthetraditionalBBAinFinance.Inadditiontotherequiredbusinesscorecoursework,GEMPPstudentstakealltheiradvanced-electivecoursesinenergybusiness.StudentsintheprogramideallyarealsomembersoftheBauerBusinessHonorsProgramandtheUHHonorsCollege.

TheGEMTrackinFinanceisaspecializationofthetraditionalBBAinFinancewhichgivesgraduatestheleadingedgewhenenteringtheenergyjobmarket.StudentsoftheGEMTrackinFinanceprogramarefinancemajorswhotakeaseriesofpre-selectedenergybusinesselectivesintheirjuniorandsenioryears.

TheGEMMinoroptionisopentoallUniversityofHoustonstudentswantingtoaddanenergybusinessflavortotheirdegree.TheGEMminorexposesstudentsoutsidetheFinancedisciplinetothefundamentalsoftheenergybusinessandEnergyFinance.Butmostimportantly,the16-credithourGEMMinorprovidesstudentswiththeknowledgebaseforafasttrackintoseniormanagementregardlessoftheirdiscipline.

Thecompletedetailsonthisprogramcanbefoundontheprogramwebsite:http://www.bauer.uh.edu/finance/gem/.

Did you know...?

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