north american gas – changing mix bob fryklund vp industry relations november 9, 2006

North American Gas – Changing Mix

Bob FryklundVP Industry Relations

November 9, 2006

Copyright © 2005 IHS Inc. All Rights Reserved.

Resources Changes

Source/Type

Location

Ownership

Market Effects• Supply and Demand Balance• LNG’s Role• Distribution changes• Effects of Price changes

Conclusions

Overview


Top Ten US Fields By Yr 2005 Annual Production

STATE FIELD 2005 BOE

ALASKA PRUDHOE BAY 650,877,691

NEW MEXICO BASIN 103,601,852

ALASKA KUPARUK RIVER 86,190,197

TEXAS NEWARK EAST 83,466,633

COLORADO IGNACIO-BLANCO 76,558,511

GULF OF MEXICO MISSISSIPPI CANYON BLOCK 0807 76,384,004

ALASKA COLVILLE RIVER 52,051,705

NEW MEXICO BLANCO 50,014,775

WYOMING POWDER RIVER BASIN COAL BED 49,030,355

WYOMING JONAH 46,820,216


TOP 20 US Gas Fields by 2005 Production

Shale Tight GasCoal Bed Methane

ConventionalConventional

TOP 20 US GAS FIELDS 2005 PRODUCTION

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

BASIN

NEWARK E

AST

IGNACIO

-BLANCO

BLANCO

POWDER R

IVER B

ASIN C

OAL BED

JONAH

CARTHAGE

KANSAS HUGO

TON

WATTENBERG

ANTRIM

ELK HIL

LS

NATURAL BUTTES

OAK HIL

L

MAM

M C

REEK

ELM GROVE

PANHANDLE WEST

FREESTONE

STRONG CIT

Y DIS

TRICT

SAWYER

GIDDIN

GS

MC

F/D


0

10

20

30

40

50

60

70

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Bcf

/Day

Remaining Onshore Offshore CBM Frac Shale Tight Gas Sands

Historical Gas Production

By Resource Type – U.S. Lower 48 States

Substantial increases in non-conventional gas drilling unable to offset conventional gas declines


0

2

4

6

8

10

12

14

16

bcf

/da

y

COALBED METHANE FRACTURED SHALE TIGHT GAS SANDS

Gas Resource PlaysU.S. Non-conventional Gas Production by Source

2005 Production:

7.7 Bcfd

2.6 Bcfd

4.7 Bcfd


North American Gas Where the Plays and Trends Are ?

Appalachian Basin

CherokeeBasin

AlbertaBasin

Powder River Basin

San JuanBasin

Arkoma Basin

Black Warrior Basin

RatonBasin

Uinta-PiceanceBasins

CBM

Tight Sds

Shale


Composite Rocky Mt Production and Forecast by BasinProduction and Proven Reserves Only

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Bcf

/Day

GR - Big Piney/LaBarge GR - Coalbed Methane GR - Great Divide/N Central

GR - Jonah Field Area GR - Lost Soldier/Hanna Basin GR - Moxa Arch

GR - Pinedale Anticline GR - Wamsutter/Washake GR - Overthrust area

Uinta Basin Conv Uinta Basin CBM Piceance Basin Conv

Piceance Basin CBM San Juan Conv San Juan CBM

Las Vegas-Raton CBM Paradox Basin Big Horn Basin

Denver Basin Wind River Basin Powder River Basin Conv

Powder River Basin CBM

Shift in Location of ReservesRockies


Vintage Gas Production ProfileU.S. Lower 48 States - July 2006

0.0000

10.0000

20.0000

30.0000

40.0000

50.0000

60.0000

70.0000

BC

F/D

ay

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

<1990

United States Total2002 base decline = 2.53 Tcf

0

200

400

600

800

1,000

1,200

1,400

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

MC

F/D

ay

United States Total

Well average production profile

~ - 500 Mcfd


Impact of Drilling on Gas Production

Annual Gas Production vs. Drilling

10.00

12.00

14.00

16.00

18.00

20.00

Pro

du

cti

on

(T

CF

)

5000

10000

15000

20000

25000

30000

New

We

ll Co

mp

letio

ns

Gas Production New WellsSource: IHS US Well and Production Databases


Coal-bed Methane by Basin

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

bfc

/day

San Juan Basin Gas-CBM Uinta Basin Gas-CBMPowder River Basin Gas-CBM Piceance Basin Gas-CBMLas Vegas-Raton Gas-CBM Green River Basin Gas-CBMCherokee Basin Gas-CBM Chautauqua Platform Gas-CBMBlack Warrior Basin Gas-CBM Arkoma Basin-CBMAppalachian Basin CBM

Trend Mill Paradox

U.S. Coal bed Gas Production by BasinEstimated reserves = 32.3 Tcf85% in Rocky Mountain Basins


Coal Bed Methane Productivity Profiles

Productivity Profiles

0

100,000

200,000

300,000

400,000

500,000

600,000

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82

Mcf

/Day

San Juan Basin

Uinta Basin

Powder River

*IHS Energy Gas Business Model & IHS Energy Consulting

430

60

400

700’

12,000’

Yieldscf/ton

3,000’


Coalbed Gas ProductivityExample: Eocene Coals - Powder River Basin, Wyoming

Vintage Well ProductionVintage Well Production

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

MC

F/D

ay

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

<1990

Powder River Basin - CBM

Vintage Production

Characteristcs:• Low rank coal• Biogenic gas• 400 – 2,500 ft

0

50

100

150

200

250M

CF

/Day

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005


Shallow coal150-220 Mcfd

Deep coal100-120 Mcfd


Powder River Basin CBMReserves Per Well

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

<199

019

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

08

MC

F/W

ell

Reserve Adds per Well Projected Reserve Adds



Wells Needed to Sustain ProductionHistorical and Projected New Wells and Wells Needed to Maintain Current Production

0.0

100.0

200.0

300.0

400.0

500.0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Nu

mb

er o

f W

ells

Historical and Projected Wells Wells needed to maintain current production



Shift in OwnershipTop 15 Gas Reserves HoldersCompany 2006 Q1

Production

Mcf/d

Reported

Net Proved

Reserves Mcf

RP Ratio

ConocoPhillips

ExxonMobil

BP

Anadarko

Chesapeake

XTO

Devon

Dominion

Chevron

Williams

Encana

EOG

Pioneer

Shell

Oxy

2296

1707

2485

2206

1408

1126

1444

943

1782

661

1161

758

420

1117

582

16, 228

13,692

13,594

11,132

7,061

6,086

5164

4856

4428

3382

3129

2948

2751

2680

2338

19.4

22

15

13.8

13.7

14.8

9.8

14.1

6.8

14.0

7.4

10.7

18.0

6.6

11.0


•Supply and Demand Balance

•LNG’s Role

•Effects of New Supplies

• Effects of Price changes

Market Factors


North American Gas Demand Growth Driven by Power Sector

Source: Cambridge Energy Research Associates.Note: Data are for US Lower 48 and Canada.

CAGRs, 2006–12

Residential: 1.4%

Commercial: 1.7%

Industrial: 1.3%

Power: 5.5%

Total: 2.4%

Industrial

Power

Residential

Commercial

Other

0

10

20

30

40

50

60

70

80

1998 2000 2005 2010 2012

BillionCubic

Feet Per Day

26% Increase:Gas for Power

18% Decline:Gas for Industry


North America 2020 Gas Supply and Demand Scenario

Source: IHS Energy gas business model

2% growth = 26 bcf/day of additional demand

Accelerated declines and lower volume discoveries will keep supply flat: (IF we invest > $30B annually)

LNG is required to fill the gap


LNG Facilities in North America—Existing and Proposed (April 2006)

Source: Cambridge Energy Research Associates.40302-3_041206

Existing

Proposed

Approved

Everett

Sparrow’s Point

ElbaIsland

Altamira

Port Pelican

Bahamas

LakeCharles

Canaport

Freeport

GulfGateway

Cameron

LazaroCardenas

Clearwater PortLongBeach

Main Pass Energy Hub

Battery Rock

Weavers Cove

Sabine

Manzanillo

Corpus Christi

Bear Head

Cabrillo Port

GulfLanding

Vermilion179

PortWestward

Keyspan LNG

Crown Landing

Port Arthur

Quoddy Bay

Northeast Gateway

Compass PortSonora PacificCoronado Islands

EnergiaCosta Azul

Strait of Canso

Kitimat

JordanCove

Prince Rupert

GrosCacouna

Keltic Petrochemical/Maple LNG

Rabaska

Galveston

Calhoun LNG

Broadwater

FreedomEnergy Center

Pascagoula

Tidelands

Creole Trail

Beacon Port

Astoria/Skipanon

Rosarito

Neptune

Northern Star

DowneastCalais LNG

TORP LNG

Cove PointOcean Way

Safe Harbor

Pacific Gateway

Topolobampo

Grande-Anse

Calypso LNG

CERACERA


LNG Oversupply 2010 to 2020?

Can the projected demand growth be financed?

Source: Cambridge Energy Research Associates

Demand


North American West to East Gas Pipeline flows and LNG imports (2005)

Source: Cambridge Energy Research Associates.

Henry Hub

AECO

Opal

Flow Bcf per day

LNG Bcf per day

Total west to east flow: 18.1 Bcf per day

Total LNG flow: 1.4 Bcf per day

Net Exports to Mexico: 0.9 Bcf per day

Net Export to Mexico

Northeast LNG

Mid-AtlanticLNG

SoutheastLNG


Continental Divide Pricing


Eastward pull on Western Canadian

supply

Bottlenecks drive gas-on-gas

competition in the Mid-Continent

SouthernCalifornia

Border

AECO

Katy

Opal


New Gas Pipelines: Bridging the Divide


Appalachia

AECO

Katy

Opal1.5 Bcfd, early

2008(+0.3, 2009)

1.8 Bcfd, 20091.0 Bcfd

1.8 Bcfd plus associated

projects

1.0 to 1.5 Bcfd

1.2 Bcfd

1.5 Bcfd

1.0 Bcfd

Various Northeast projects


•Situation – Higher natural gas prices have led to increased drilling activity, but gas production has not increased significantly

•Complication – Cost of gas production is increasing as a result of market driven input costs and a maturing resource base

•Concern – What are the implications of these trends on the future competitiveness of North America gas resources?

Price Effects


Impact of Gas Price: US Gas Drilling

Sources: Cambridge Energy Research Associates, Baker Hughes, IFERC HH Gas Prices, US Energy Information Administration.

1

2

3

4

5

6

7

8

9

10

200 300 400 500 600 700 800 900 1,000 1,100 1,200 1,300 1,400

Domestic US Natural Gas Rig Count

12-Month Gas

Price (dollars

perMMBtu)

9

10

11

12

13

14

15

16

17

18

1995–96

1997–98

1999–2000

2001–02

2003–04

2005–06

1993–94

May 2006


2006 Canadian Rigs

Baker Baker HughesHughes

2006 Canadian Gas Wells

0

50

100

150

200

250

300

350

400

450

500

5/12

/200

6

5/19

/200

6

5/26

/200

6

6/2/

2006

6/9/

2006

6/16

/200

6

6/23

/200

6

6/30

/200

6

7/7/

2006

7/14

/200

6

7/21

/200

6

7/28

/200

6

8/4/

2006

8/11

/200

6

8/18

/200

6

8/25

/200

6

9/1/

2006

9/8/

2006

9/15

/200

6

9/22

/200

6

9/29

/200

6

10/6

/200

6

10/1

3/20

06

10/2

0/20

06

10/2

7/20

06

Date

No

We

lls

Apache,Encana,Devon,CNR Apache,Encana,Devon,CNR redirect drilling dollars from redirect drilling dollars from conventional gasconventional gas


North American Regional Gas Resource Costs

Regional Cost Comparison - Example

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

0 100 200 300 400 500 600 700 800Reserves (TCF)

Cost

$/M

cf Range of LNG Competition


Conclusions:• Unconventional Gas Resources will continue to increase in

importance in the US energy mix.• Upside exists as technology and experience increase from best

practices and lessons learned• Potential constraints are- price, environmental issues, costs and

manpower shortages.• Location of unconventionals is changing many markets– regionally

and locally• Further market changes are expected when LNG en mass arrives

in ’09-’10.• Some regions, such, as Canada are very susceptible to gas price

fluctuations.

north american gas – changing mix bob fryklund vp industry relations november 9, 2006

Documents

production slide

gas production source

ihs us

coal bed gas production

production databases

mcfd slide

bcfd slide

vintage gas production