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Arizona Corporation Commission Arizona Corporation Commission Workshop on Natural Gas Infrastructure NOIWorkshop on Natural Gas Infrastructure NOI

February 13, 2004February 13, 2004Phoenix, ArizonaPhoenix, Arizona

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Focus on Southwestern US Market Focus on Southwestern US Market

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Phoenix

Keystone Gas Storage

EPNG System

Natural Gas Infrastructure To Serve Arizona Natural Gas Infrastructure To Serve Arizona Unocal’s Keystone Gas Storage Facility Unocal’s Keystone Gas Storage Facility

Keystone Gas Storage• Located on the suction

side of the EPNG Keystone Compressor Station

• Access to San Juan and Permian Supply

• Access to EPNG Southern Mainline Markets

Keystone is well positioned to serve the growing Arizona Market.

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Keystone Gas Storage FacilityKeystone Gas Storage Facility

Current 2005

Storage Caverns 2 5

Working Gas Capacity 2 BCF 5 BCF

Injection (MMCFD) 100 167

Deliverability (MMCFD) 200 333

Pipeline Interconnects: El Paso

Northern NaturalTranswestern

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Keystone Gas StorageKeystone Gas StorageBenefits To Arizona CustomersBenefits To Arizona Customers

• Security of supply– Supply Diversity

• Manage daily and intraday load swings• Optimize pipeline capacity utilization• Manage Price Volatility• Meet Seasonal needs

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Keystone Gas StorageKeystone Gas StorageServices OfferedServices Offered

• Firm Storage– Customer has firm injection, withdrawal and capacity rights

and access to all three interconnects

• Park and Loan– Customer and Keystone agree to a specific injection and

withdrawal schedule, receipt and delivery points, and fee schedule – can be firm or interruptible

• Examples: cash to next month, weekend to next week, and intra-day to next trading day

• Wheeling – Customer can make use of the Keystone interconnects on an

interruptible basis to move gas between El Paso, NNG and TW

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Keystone Gas StorageKeystone Gas StorageFirm Storage Service Rate StructureFirm Storage Service Rate Structure

• Demand Charges– Capacity $0.05/mmbtu– Injection $1.50/mmbtu/d– Withdrawal $0.75/mmbtu/d

• Commodity Charges– Injection $0.01/mmbtu plus 1.5% fuel retention– Withdrawal $0.01/mmbtu

• Overrun Charges* (Maximum Rates)– Injection $0.10/mmbtu– Withdrawal $0.10/mmbtu

Typical 60 day cycle service capability $1.50/MMBTU of Capacity per year

* Overrun Charges are in addition to the applicable commodity charges

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Does Arizona need Market Area Storage?Does Arizona need Market Area Storage?

• Yes!– Keystone can meet much of Arizona’s needs

– Market area storage gives Arizona greater security of supply and real time load following capability

– Arizona needs a mix of market area and production area storage options

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• Provide 3-6 BCF of high deliverability storage capacity to serve the Phoenix-Tucson market

• Serve Load following requirements of power generators, peaking requirements of LDC’s and provide market supply security

• Focus is Picacho Basin

• Significant potential for pipeline interconnects and potential direct connections

• In Service 2006-2007

Unocal’s Storage Development Activities in ArizonaUnocal’s Storage Development Activities in Arizona