Permian Basin OverviewPermian Basin Overview

July 25, 2006July 25, 2006

McElmo Dome Sheep Mountain

Bravo Dome

Guyman

Doe Canyon

Wellman PL

0 25 50 75 10012.5Miles

Permian Basin CO2 Pipeline Map

K INDER M ORGAN

Contact 1-800-247-4122www.kindermorgan.com

McElmo Dome Unit

Doe Canyon Unit

Cortez PL

Sheep Mountain Unit

Bravo Dome Unit

Bravo PL

Sheep Moutain PL

Denver City

CRC PL

Central Basin PL

W Bravo Dome

Val Verde Plants

How did it Happen?How did it Happen?

Wasson

TexasNew Mexico

Welch

Slaughter

SACROC

Salt Creek

Terrell Plant

Grey Ranch Plant

Mitchell Plant

Puckett Plant

YatesPermian Permian BasinBasin

Circa 1970Circa 1970

GeraldineFord

ElmarN. Dollarhide

S Cross

S. Cowdan

Means Unit

Cogdell

Mabee

SeminoleNorth Hobbs

Adair

Southern CRCSouthern CRC

CR

C P

ipel

ine

McCamey

New Mexico

Welch

Slaughter

SACROC

Salt Creek

Terrell Plant

Grey Ranch Plant

Mitchell Plant

Puckett Plant

CR

C P

ipel

ine

Yates

Permian Permian BasinBasin19721972

S Cross

GeraldineFord

ElmarN. Dollarhide

Wasson

TexasMeans Unit

Mabee

S. Cowdan

Cogdell

Seminole

Adair

North Hobbs

Windfall Profits Tax adopted in 1980Windfall Profits Tax adopted in 1980 Waterfloods unitized in the 60’s and 70’s had started Waterfloods unitized in the 60’s and 70’s had started

to declineto decline Owners of Potential EOR Projects aligned with COOwners of Potential EOR Projects aligned with CO22

Source FieldsSource Fields Major Oil Companies operating in PermianMajor Oil Companies operating in Permian

Shell, Mobil, ARCO, Exxon, AmocoShell, Mobil, ARCO, Exxon, Amoco Source Field UnitizationsSource Field Unitizations

Shell, Mobil, et al – McElmo DomeShell, Mobil, et al – McElmo Dome ARCO/Exxon – Sheep Mountain UnitARCO/Exxon – Sheep Mountain Unit Amoco, Hess, et al - Bravo Dome UnitAmoco, Hess, et al - Bravo Dome Unit

Majors commenced planning and development for Majors commenced planning and development for their EOR projectstheir EOR projects

Southern CRCSouthern CRC

CR

C P

ipel

ine

McCamey

Denver City

New Mexico

S. Cowdan

Slaughter Salt Creek

Terrell Plant

Grey Ranch Plant

Mitchell Plant

Puckett Plant

CR

C P

ipel

ine

Elmar

YatesPermian Permian

BasinBasin1982 - 19891982 - 1989

Sheep Mountain

Bravo DomeMcElmo Dome

Welch

Central B

asin

N. DollarhideGeraldineFord

Mabee

Means Unit

Denver UnitWasson

S Cross

SACROCTexas

CordonaLake

Cogdell

Cortez Pipeline

SMPL B

ravo P/L

Seminole

Val Verde

CR

C P

ipel

ine

McCamey

Denver City

New Mexico

S. Cowdan

Slaughter Salt Creek

McElmo Dome

Terrell Plant

Grey Ranch Plant

Mitchell Plant

Puckett Plant

CR

C P

ipel

ine

Yates

Sheep Mountain

Bravo Dome

Permian Permian BasinBasin

1990 - 19991990 - 1999

Welch

Este

GeraldineFord

Elmar

N. Dollarhide

S Cross

SACROC

CordonaLake

Reinecke

Sharon Ridge

Cogdell

Mabee

Cortez Pipeline

SMPL Bravo

P/L

Central B

asin

Means Unit

Adair

Seminole

Val Verde

CR

C P

ipel

ine

McCamey

Denver City

New Mexico

S. Cowdan

Slaughter Salt Creek

McElmo Dome

Terrell Plant

Grey Ranch Plant

Mitchell Plant

Puckett Plant

CR

C P

ipel

ine

Yates

Sheep Mountain

Bravo Dome

Permian Permian BasinBasin

2000 - 20062000 - 2006

Welch

Este

Este

GeraldineFord

Elmar

N. Dollarhide

S Cross

SACROC

CordonaLake

Reinecke

Sharon Ridge

Cogdell

Mabee

Cortez Pipeline

SMPL Bravo

P/L

Central B

asin

Means Unit

Adair

Seminole

Centerline PL

North Hobbs

EOR Projects started in 1983 are still EOR Projects started in 1983 are still purchasing CO2.purchasing CO2.

Original projections indicated these Original projections indicated these projects would be on total recycle but projects would be on total recycle but HCPV Slugs have steadily increased.HCPV Slugs have steadily increased.

Projects such as Denver Unit and Projects such as Denver Unit and Seminole San Andres Unit have been Seminole San Andres Unit have been expanded into the Transition Zone and expanded into the Transition Zone and Residual Oil Zone respectivelyResidual Oil Zone respectively

Higher oil prices have justified startup Higher oil prices have justified startup of smaller and/or previously marginal of smaller and/or previously marginal projectsprojects

Current Denver City CO2 supply Current Denver City CO2 supply from all sources 1,420 MMCFDfrom all sources 1,420 MMCFD

With oil price increasing, project With oil price increasing, project expansions as well as new projects expansions as well as new projects are justifying expansion of CO2 are justifying expansion of CO2 source fieldssource fields

Kinder Morgan and partners are Kinder Morgan and partners are expanding McElmo Dome Unit by expanding McElmo Dome Unit by 200 MMCFD and initiating 200 MMCFD and initiating development of Doe Canyon Unit development of Doe Canyon Unit to 100 MMCFD.to 100 MMCFD.

Kinder Morgan and co-owners are Kinder Morgan and co-owners are planning expansion of Cortez planning expansion of Cortez Pipeline to accommodate SW Pipeline to accommodate SW Colorado source field expansionsColorado source field expansions

Expansion and development Expansion and development opportunities also exist in NE New opportunities also exist in NE New Mexico at Bravo Dome Unit Mexico at Bravo Dome Unit operated by Oxy and West Bravo operated by Oxy and West Bravo Dome Unit operated by HessDome Unit operated by Hess

0

500

1000

1500

1985 1990 1995 2000 2005

2005 was record 2005 was record year, supplies pro-year, supplies pro-rated on occasionrated on occasion

How does the Permian Basin success How does the Permian Basin success story translate to Wyoming?story translate to Wyoming?

Supply, Transportation and Demand Supply, Transportation and Demand have to be aligned. The 80’s had the have to be aligned. The 80’s had the Supply and Demand fields mostly owned Supply and Demand fields mostly owned by the same companies. It is different by the same companies. It is different today.today.

Must be a win-win proposition for allMust be a win-win proposition for all What is the catalyst for EOR expansion What is the catalyst for EOR expansion

in Wyoming - oil price, emissions in Wyoming - oil price, emissions regulation, other?regulation, other?

CO2-A (emissions) is more CO2-A (emissions) is more expensive to capture and expensive to capture and compress than CO2-N is to compress than CO2-N is to develop and producedevelop and produce

CO2-A is likely to cost $2.00 - CO2-A is likely to cost $2.00 - $2.50/MCF Delivered$2.50/MCF Delivered

6-10 MCF/BBL has been a “rule of 6-10 MCF/BBL has been a “rule of thumb” utilization rate for new thumb” utilization rate for new projects in the Permian Basinprojects in the Permian Basin

End