2003 Natural Gas Market Needs

Ziff ConferenceOctober 29, 2002

Steve BeckerVice President, Gas Strategy

PowerPower

TransmissionTransmission

3

Start of a New Era

1. Replacing Market Services• how will industry rebundle services?

2. Expiring Pipeline Contracts• who will be the shippers?

3. Developing Arctic Gas• will capital decisions on Arctic pipelines occur in

this next era?

4

Start of a New Era

Supply Surplus1982-1992

WCSB Growth1992-2002

MatureInfrastructure

2002-2012

Pipeline Deregulation Expansions EmergingRegional Hubs

Marketer Aggregators Trading PhysicalContracting

Producer Supply Bubble Drilling &Mergers

Arctic GasExploration

5

Replacing Missing Middlemen

• Pricing• transparency• liquidity• financial derivatives

• Aggregation role as shippers on pipelines• Geographic arbitrage between pipeline interconnects• Increased utilization of existing facilities

Industry participants need to rebundle services to replicate efficiencies of the past decade

Services provided:

6

Rebundling Services:Regional Hubs will Emerge

NIT DAWN

Supply area to includeWCSB

Eastern market hub

Amalgamate pipeline interconnect points and create more price liquidity

CHICAGO

Western market hub

7

Pipeline Export Contract Profile

0

5

10

15

20

25

0

5

10

15

20

25Ex-AB Pipeline CapacityAvailable SupplyPGTAllianceNorthern BorderMainlineChicago Line

Annual contracts: variable cost netbacks, vibrant secondary marketDaily contracts: full cost netbacks, no secondary market

Annual or Daily Contracts?

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Arctic GasKey Decision Milestones

0

5

10

15

20

25

30

0

5

10

15

20

25

30

Discovered

Undiscovered

Unconventional

Northern

Pipeline Capacity*

Capital decision for 2010

*Capital decision for 2008

Capital decisions on pipelines and success rates in WCSB will drive exploration activity

9

Arctic Gas - 4 Integrated Projects

ArcticNationalWildlifeReserve

Yukon FlatsWildlife Reserve

IvvavikNational

Park MackenzieDelta

ALASKA

YUKON

NORTHWESTTERRITORIES

MANITOBA

SASKATCHEWANALBERTA

BRITISHCOLUMBIA

WASHINGTON IDAHO

MONTANA

NORTHDAKOTA

Inuvik

Prudhoe Bay

Boundary Lake

Alberta/NWT

NUNAVUT

Kingsgate Monchy

Northern Gas Reserves

Mackenzie Valley Project

Alaska Highway ProjectAlaska Portion Yukon / B.C.

Alberta / Existing System

U.S. Pipelines

Alberta to Chicago

Integration provides flexibility and staging to meet market timing

10

Summary

• Industry landscape has changed

• We are entering a new era

• TransCanada is consulting with producers, marketers and end users

• Together, we will define and provide solutions for this new era