AMEE/USAEE/CAEE/IAEE - MexicoGas & Power – Convergence

or Divergence?

©UH IELE, 2No reproduction, distribution or attribution without permission.

Just the Facts, Ma’am

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

1949

1952

1955

1958

1961

1964

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

Pric

e, $

/mcf

0

5,000

10,000

15,000

20,000

25,000 Production, Consum

ption, Bcf

Wellhead PriceMarketed ProductionTotal Consumption

Wellhead pricecontrol era Open access

era

“Gas bubble”

NGPA, PIFUA, PURPA

EPAct

Source: U.S. EIA

©UH IELE, 3No reproduction, distribution or attribution without permission.

Where’s the Beef?

0.001.002.003.004.005.006.007.008.009.00

10.00

Apr-90

Apr-91

Apr-92

Apr-93

Apr-94

Apr-95

Apr-96

Apr-97

Apr-98

Apr-99

Apr-00

Apr-01

Apr-02

Apr-03

Month

Nom

inal

Spo

t Pric

e ($

/Mcf

)

Period of suspected market manipulation

No suspected market manipulation

Source: NYMEX

©UH IELE, 4No reproduction, distribution or attribution without permission.

Is It Changing Fundamentals?

$1.00$1.50$2.00$2.50$3.00$3.50$4.00$4.50$5.00$5.50$6.00

Jan-9

2Ja

n-93

Jan-9

4Ja

n-95

Jan-9

6Ja

n-97

Jan-9

8Ja

n-99

Jan-0

0Ja

n-01

Jan-0

2Ja

n-03

Nat

ural

Gas

Pric

es, H

enry

Hub

, $/m

cf

12-month MALinear (12-month MA)

Source: NYMEX

©UH IELE, 5No reproduction, distribution or attribution without permission.

LNG Takes Up the Slackas a “Price Taker”

0

10

20

30

40

50

60

Jan-9

7May

-97Sep

-97Ja

n-98

May-98

Sep-98

Jan-9

9May

-99Sep

-99Ja

n-00

May-00

Sep-00

Jan-0

1May

-01Sep

-01Ja

n-02

May-02

Sep-02

Jan-0

3May

-03

LNG

Impo

rts, B

cf

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

Spot

Pric

es, $

/mcf

LNG ImportsSpot Prices

Source: U.S. EIA

©UH IELE, 6No reproduction, distribution or attribution without permission.

LNG Value Chain

$0.3-$0.5/MMBtu$0.4-$1.0/MMBtu

$0.8-$1.20/MMBtu$0.5-$1.0/MMBtu

REGASIFICATION& STORAGESHIPPINGLIQUEFACTIONEXPLORATION &

PRODUCTION

TOTAL = $2.00 - $3.70Greatest variability are in upstream feedstock for liquefaction

and transportation distance.

Sources: Industry

©UH IELE, 7No reproduction, distribution or attribution without permission.

Global Warming: ContrarianViewpoint

“Paleoclimatic data also show the great complexity of Earth's climate system, including large (1/3-1/2 of the entire glacial-interglacial amplitude), abrupt (order of a decade), and widespread (to hemispheric or broader scale) climate changes that are not explainable directly by changes in greenhouse gases.”

Science epicenters: Antarctic andGreenland cooling, sedimentcoring; solar cycles, magnetismand atmospheric water vapor

Sources: Doran, et. al., Nature, 2002. Richard Alley, Penn State, GSA, 1999.