The Market Outlook for Natural Gas: The Wyoming Natural Gas Pipeline Authority’s Perspective

Leadership Wyoming Class of 2005Gillette, WY

October 21, 2004

PreviewPreview

• WPA mission statementWPA mission statement• Forecast for Natural Gas Forecast for Natural Gas • Facts and observationsFacts and observations• Past and future production growthPast and future production growth• Existing infrastructure and pricing Existing infrastructure and pricing

historyhistory• PipelinesPipelines

Wyoming Pipeline Authority Wyoming Pipeline Authority ResolutionResolution

May 2004May 2004

Resolution No. 1Resolution No. 1

By statue, (37-5-103 (a)(iv)), the Wyoming Natural Gas Pipeline Authority is By statue, (37-5-103 (a)(iv)), the Wyoming Natural Gas Pipeline Authority is authorized to “plan, finance, construct, develop, acquire, maintain and operate within authorized to “plan, finance, construct, develop, acquire, maintain and operate within or without the state of Wyoming, pipelines, pumps, storage, and other attendant or without the state of Wyoming, pipelines, pumps, storage, and other attendant facilities and equipment necessary therefore and all other property, structures, facilities and equipment necessary therefore and all other property, structures, equipment, facilities and works of public improvement necessary or useful for the equipment, facilities and works of public improvement necessary or useful for the accomplishment of the purposes for which the Authority was created.”accomplishment of the purposes for which the Authority was created.”

AndAndBy statue, (37-5-103 (a)(xiii)), the Wyoming Natural Gas Pipeline Authority By statue, (37-5-103 (a)(xiii)), the Wyoming Natural Gas Pipeline Authority

is authorized to “Do any and all things necessary or proper for the development, is authorized to “Do any and all things necessary or proper for the development, regulation and accomplishment of the purpose of the authority within the limitations regulation and accomplishment of the purpose of the authority within the limitations of authority granted by this act.”of authority granted by this act.”

Hereby be it resolved that the Wyoming Natural Gas Pipeline Hereby be it resolved that the Wyoming Natural Gas Pipeline Authority, shall involve itself or intervene as necessary in any and all Authority, shall involve itself or intervene as necessary in any and all matters it deems necessary related to the timely and reasonable matters it deems necessary related to the timely and reasonable development of natural gas in the state of Wyoming in order that the development of natural gas in the state of Wyoming in order that the Authority accomplishes its goals and statutory responsibilities.Authority accomplishes its goals and statutory responsibilities.

Natural Gas Production, Consumption, and Imports,Natural Gas Production, Consumption, and Imports,1970 - 2025 (trillion cubic feet)1970 - 2025 (trillion cubic feet)

0

5

10

15

20

25

30

35

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Consumption

Production

Net Imports

History Projections

0

1

2

3

4

5

6

Pipeline Liquefied Natural Gas

Natural Gas Net Imports, 2002 and 2025(trillion cubic feet)

2002

2025

2025

Residential Commercial Industrial Transportation0

5

10

15

20

25

30

35

40

45

Primary Energy Consumption, 2002 and 2025(quadrillion Btu)

2002

Gas Facts and ObservationsGas Facts and Observations

Wyoming and the Central Rockies have about a ten-year supply of Wyoming and the Central Rockies have about a ten-year supply of

natural gas for the U.S. (more than 171 Tcf).natural gas for the U.S. (more than 171 Tcf). Because of pipeline constraints, it would take about 150 years to bring Because of pipeline constraints, it would take about 150 years to bring

this gas supply to market.this gas supply to market. Wyoming and the Central Rockies have more than 20% of the Wyoming and the Central Rockies have more than 20% of the

remaining North American supply, but less than 7% of the U.S. remaining North American supply, but less than 7% of the U.S.

market.market. Based on the foregoing, Wyoming should export 12 Bcf/d, rather than Based on the foregoing, Wyoming should export 12 Bcf/d, rather than

the current rate of 4 Bcf/d.the current rate of 4 Bcf/d. Other gas supply provinces in North America are mature and are Other gas supply provinces in North America are mature and are

declining (Canada, Mid-Continent, Texas, & Louisiana).declining (Canada, Mid-Continent, Texas, & Louisiana). Wyoming has the opportunity to gain market, ahead of the expansion Wyoming has the opportunity to gain market, ahead of the expansion

of LNG terminals or development of Alaska pipelines.of LNG terminals or development of Alaska pipelines.

Gas Facts and Observations Gas Facts and Observations (Continued)(Continued)

There are many alliances and benefits to developing this gas There are many alliances and benefits to developing this gas

resource:resource:• Pipelines will increase their business with new facilities.Pipelines will increase their business with new facilities.

• Producers can market the resources profitably.Producers can market the resources profitably.

• Consumers will be assured a secure and competitive supply.Consumers will be assured a secure and competitive supply.

• Wyoming has revenue to run the state.Wyoming has revenue to run the state.

• The U.S. benefits from a currently underutilized energy supply.The U.S. benefits from a currently underutilized energy supply.

The single-most important objective for Wyoming and the The single-most important objective for Wyoming and the

country’s foreseeable energy needs is to build more natural country’s foreseeable energy needs is to build more natural

gas pipelines into Wyoming and the Central Rockies.gas pipelines into Wyoming and the Central Rockies. Wyoming legislation provides the tools to plan, finance, build, Wyoming legislation provides the tools to plan, finance, build,

and operate natural gas pipelines.and operate natural gas pipelines.

Where is Production Growing . . .Where is Production Growing . . .

The Rockies!!!!!The Rockies!!!!!

Wyoming vs Oklahoma

0

50,000

100,000

150,000

200,000

250,000

Jan-91

Jan-92

Jan-93

Jan-94

Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04P

rod

uc

tio

n (

Mm

cf/

mo

nth

)

Wyoming

Oklahoma

1.48 bcfd loss

2.10 bcfd gain

EIA Data

Wyoming vs Kansas

0

50,000

100,000

150,000

200,000

250,000

Jan-91

Jan-92

Jan-93

Jan-94

Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04P

rod

uct

ion

(M

mcf

/mo

nth

)

0.77 bcfd loss

EIA data

Natural Gas Pipelines & Volume of Natural Gas Pipelines & Volume of Remaining Supply (Tcf)Remaining Supply (Tcf)

OpalOpal

190

182

33

171

7

97

45

161

22

21

72

The pipeline system The pipeline system is underbuilt in is underbuilt in relation to the relation to the natural gas resource natural gas resource in the Central Rocky in the Central Rocky Mountains. This gas Mountains. This gas supply is supply is underutilized and underutilized and undervalued as a undervalued as a consequence of lack consequence of lack of pipeline capacity.of pipeline capacity.

Pipeline Export ProjectsPipeline Export ProjectsEl Paso El Paso

• Cheyenne Plains – under constructionCheyenne Plains – under construction• Ruby ProjectRuby Project

Kern River Gas Transmission Co.Kern River Gas Transmission Co.• Kern River Pipeline ExpansionKern River Pipeline Expansion

Williston Basin Interstate Pipeline Co.Williston Basin Interstate Pipeline Co.• Grasslands Pipeline Expansion - completedGrasslands Pipeline Expansion - completed

Northern Border Partners, L.P.Northern Border Partners, L.P.• Bison ProjectBison Project

Kinder MorganKinder Morgan• AdvantageAdvantage• TransColorado (CO to NM)TransColorado (CO to NM)

Enbridge Enbridge • Chicago ProjectChicago Project

Southern Star Southern Star • Western Frontier ProjectWestern Frontier Project

Kern Expansion

Northwest PL Expansion

El Paso ‘Cheyenne Plains’ and Kinder ‘Advantage’

Northen Border ‘Bison’ Pipeline

Cheyenne PlainsCheyenne Plains

Intraregional ProjectsIntraregional ProjectsEl Paso Front Range ExpansionsEl Paso Front Range ExpansionsXcel Front Range ProjectsXcel Front Range ProjectsKinder MorganKinder Morgan• Huntsman Storage ProjectHuntsman Storage Project• Greasewood to CheyenneGreasewood to Cheyenne

Totem Totem • Gas Storage ProjectGas Storage Project

Questar Questar • Gas Storage ProjectGas Storage Project• Greasewood to Kanda loopGreasewood to Kanda loop

Wyoming Interstate/Overthrust Backhaul ProjectsWyoming Interstate/Overthrust Backhaul ProjectsJonah/Opal/Powder/Wind River Gathering/Processing Jonah/Opal/Powder/Wind River Gathering/Processing

ExpansionsExpansionsEnCana EnCana • Entrega NW Colorado to Cheyenne ProjectEntrega NW Colorado to Cheyenne Project

Before WPA

After WPA

Cost of Limited Infrastructure to Cost of Limited Infrastructure to WyomingWyoming

$130 + million in Federal/State $130 + million in Federal/State royalties and severance taxes – royalties and severance taxes – 2002.2002.

$1 million per day in March 2003.$1 million per day in March 2003. Stalled investment in development of Stalled investment in development of

mineral resources.mineral resources. Limited ability to predict revenues Limited ability to predict revenues

with certainty.with certainty.

Variables Influencing Success Variables Influencing Success

Access to Lands in a Timely MannerAccess to Lands in a Timely Manner PricePrice Timing of Regulatory ApprovalsTiming of Regulatory Approvals Gathering System Capacities and Gathering System Capacities and

PressuresPressures Transportation Export CapacityTransportation Export Capacity Capital EfficiencyCapital Efficiency Public AcceptancePublic Acceptance

BiomassSolar Wind

To produce 20Q/y (20% of US energy consumption)

The Wyoming Pipeline Authority The Wyoming Pipeline Authority WillWill

Promote all industry sponsored and supported Promote all industry sponsored and supported projects.projects.

Proactively promote infrastructure development Proactively promote infrastructure development within the state and the Rocky Mountain Region.within the state and the Rocky Mountain Region.

Promote efficient utilization of existing Promote efficient utilization of existing infrastructure in a cost effective manner.infrastructure in a cost effective manner.

Promote development of Wyoming’s mineral Promote development of Wyoming’s mineral resource base in a systematic, streamlined and resource base in a systematic, streamlined and environmentally responsible manner.environmentally responsible manner.

Utilize its bonding authority to build or cause to Utilize its bonding authority to build or cause to be built infrastructure projects that will enhance be built infrastructure projects that will enhance state netbacks and promote development of a state netbacks and promote development of a resource base that is in the nation’s best resource base that is in the nation’s best interests.interests.

Thank YouThank You

Marc StrahnMarc Strahn

Ph 307.237.5009Ph 307.237.5009

Fax 307.237.5242Fax 307.237.5242

wyomingpipelinea@qwest.netwyomingpipelinea@qwest.net

This presentation can be accessed via our website at: This presentation can be accessed via our website at: www.wyopipeline.comwww.wyopipeline.com