Outlook on Natural Gas and LNGOutlook on Natural Gas and LNG

Fuel Diversity in New EnglandFuel Diversity in New England

• Recent build-out ~10,700 MW• Gas-fired generation (% Total NE GWh)

– 1999: 16%

– 2003: 41%

– 2010: 49%

2002 Study: Gas-fired Generation (2004/5)2002 Study: Gas-fired Generation (2004/5)

0

500

1000

1500

2000

2500

3000

3500

4000

MW

Algonquin Iroquois M&N PNGTS Tennessee

North American Natural Gas SupplyNorth American Natural Gas Supply

ReservesTotal: 247.9 Tcf

Sources: EIA, CAPP, Potential Gas Committee, NEB

Resource BaseTotal: 1,789 Tcf

Gulf Coast293WCSB

179

Rocky Mountains175

Mid-Continent117

Other588.1

U.S. CoalbedMethane

169Reserves

247.9

Atlantic Canada(Scotian Shelf)

20

1.8

WCSB56.7

Rocky Mountains

55.5

Other26.5

Atlantic Canada

Mid-Continent

43.1

Gulf Coast64.3

Gas Sources and SuppliesGas Sources and Supplies• Large resource base in North America (1,789 Tcf)• Focus on converting resources to reserves and

production• Gulf Coast + U.S. mid-continent + WCSB ~ 75% of North

American production• Traditional producing basins experiencing depletion

effects– Natural decline in reservoir/field production

– Most fields are facing an onslaught of accelerated depletion

– “Treadmill” effect

– No more “low hanging fruit”

Maturation of Existing Production BasinsMaturation of Existing Production Basins

Running hard to maintain production levels– Gulf Coast

• Onshore and shallow water production flat to declining

– Western Canada (WCSB)• Declining production from shallow wells in the east• Growth from deeper, more expensive wells

– Atlantic Canada• Long-term potential• Recent reassessments

Drilling v. ProductionDrilling v. Production

0

5000

10000

15000

20000

25000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

# of

Wel

ls D

rille

d

46

47

48

49

50

51

52

53

54

Bcf

/d

Development/Exploration Supply

2002 2003

Source: EIA

U.S. Natural Gas Production HistoryU.S. Natural Gas Production HistoryIndicates 28% 2003 Decline Rate

Source: IHS Energy, Petroleum Information Corporation, EOG Resources

E&P in Atlantic CanadaE&P in Atlantic Canada

• Current Scotian Shelf production relatively small– Sable Island: 0.4-0.5 Bcf/d

– Gulf Coast: 26.3 Bcf/d

– Western Canada: 16.5 Bcf/d

• High costs, difficult reservoir conditions• Recent setbacks:

– Postponement of Deep Panuke

– Downward revisions of proven reserves

– Lack of new exploration success

Sable Island ProductionSable Island Production

0

100

200

300

400

500

600

700F

eb-0

1

Apr-

01

Jun-0

1

Aug

-01

Oct

-01

Dec-

01

Feb-0

2

Apr-

02

Jun-0

2

Aug

-02

Oct

-02

Dec-

02

Feb-0

3

Apr-

03

Jun-0

3

Aug

-03

Oct

-03

Dec-

03

Feb-0

4

Apr-

04

Jun-0

4

Aug

-04

Av

era

ge

Da

ily

Ga

s P

rod

uc

tio

n (

MM

cf/

d)

Henry Hub Historical Prices and ForwardsHenry Hub Historical Prices and Forwards

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2001

2000

2002

2004 (with NYMEX futures)

2003

Source: Bloomberg

Spark Spreads During New England Cold SnapSpark Spreads During New England Cold Snap

-$600

-$400

-$200

$0

$200

$400

$600

$800

$1,000

01/12/04 01/13/04 01/14/04 01/15/04 01/16/04 01/17/04 01/18/04 01/19/04

$/M

Wh

Day Ahead Real Time

Source: ISO-NE

The LNG Supply ChallengeThe LNG Supply Challenge

0

20

40

60

80

100

2000 2004 2008 2012 2016 2020

Bcf/d

WCSB, L-48,East Coast,Existing LNG plus expansions

New LNG, & Northern Gas

North American Demand

Source: TransCanada

U.S. LNG Imports by Source Country, 1992-2003U.S. LNG Imports by Source Country, 1992-2003

Source: EIA

0

100

200

300

400

500

600

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

An

nu

al I

mp

ort

s (B

cf)

Algeria Australia Nigeria Qatar Trinidad Others

Quarterly LNG DeliveriesQuarterly LNG Deliveries

Source: EIA, U.S. Natural Gas Imports and Exports:Issues and Trends 2003

Major LNG Trade Movements, 2002 (Bcf)Major LNG Trade Movements, 2002 (Bcf)

Source: EIA, The Global Liquefied Natural Gas Market: Status and Outlook

Atlantic Basin Liquefaction Capacity, October 2003Atlantic Basin Liquefaction Capacity, October 2003

Source: EIA, The Global Liquefied Natural Gas Market: Status and Outlook

Atlantic Basin LNG Market DynamicsAtlantic Basin LNG Market Dynamics

• Revitalized Atlantic Basin supply locations• Integration of the LNG supply chain• Crunch on traditional supply has caused a

proliferation of new projects• Trend towards commoditization

– Global market

– Flexibility in charters

– Increased array of transportation options

Interstate Pipelines Serving New EnglandInterstate Pipelines Serving New EnglandTotal Deliverability over 4.0 Bcf/d

Distrigas LNGDistrigas LNG

New Mystic(272 MMcf/d)

Backup for New Mystic

LDCLNG

Terminals

KeySpan,AlgonquinTennessee

Distrigas EverettLNG Terminal

Storage Capacity: 3.5 BcfDaily Vaporization: 1 Bcf

LNG Imports(158.3 Bcf in 2003)

(150 MMcf/d)

Satellite LNG Tanks in the Greater NortheastSatellite LNG Tanks in the Greater Northeast

Source: EIA, GasTran Gas Transportation System, LNG Facilities Database

Everett Import Facility3.5 Bcf1.0 Bcf/d Total Vaporization Capability 115 MMcfd - Truck

Proposed LNG Projects Serving the NortheastProposed LNG Projects Serving the Northeast

Project Location

Deliverability

(MMcf/d)

Cacouna Energy Reviere-Du Loup, QC 500

Rabaska Project Quebec City, QC 500

Bear Head Point Tupper, NS 750-1000

Canaport St. John, NB 500-1000

Northeast Gateway Energy Bridge

Hubline, MA 400

Weaver’s Cove Fall River, MA 400

KeySpan LNG Providence, RI 500

Broadwater Energy Long Island, NY 1000