NW Gas Market Outlook:Winds of Change

Northwest Power Conservation CouncilNatural Gas Advisory Committee

June 16, 2011

1914 Willamette Falls Dr., #255West Linn, OR 97068

(503) 344-6637www.nwga.org

NWGA Members:Avista Corporation

Cascade Natural Gas Co.

Intermountain Gas Co.

NW Natural

Puget Sound Energy

Spectra Energy Transmission

FortisBC Energy, Inc.

TransCanada’s GTN System

Williams NW Pipeline

Recent Gas Demand

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

PNW Gas Deliveries (source: US EIA, StatCan)Generation Industrial Commercial Residential

Mill

ion

Dth

Hydro NatGas Coal Nuclear Wind (32%)

0

2000

4000

6000

8000

10000

12000

14000

16000

2008 Generating Capability v Dispatch by Source

Capability

Dispatch

Energy Source

MW

a2008 Energy By Source

89%

48%

94%

108% 109%

Source: NPCC

Demand Forecast

Base Case Forecast by Sector

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-200

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

Power Generation - High

Residential

Commercial (Sales)

Industrial (Transport & In-terruptible)

Power Generation

Three Year Forecast Comparison

700000000

750000000

800000000

850000000

900000000

950000000

1000000000

1050000000

1100000000

2008-092009-102010-11

Mill

ion

Dth -11%

Decline in Projected Industrial Use

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20100000000

150000000

200000000

250000000

300000000

350000000

400000000

Industrial Demand

2008-092009-102010-11

Mill

ion

Dth

-27.5%

Demand Composition: 1996

Residen-tial

26%

Com-mercial

20%

Industrial51%

Generation3%

Demand Composition 2019-20

Shale Gas A Game Changer

1st Quarter 20071st Quarter 20083rd Quarter 2010

1,006

2,439

80,930

Productivity Dramatically Improved Southwest EnergyFayetteville Shale

2,104

4,503

+114%

2011

-45%

+142%

$2.8$2.6

+8%

18

33

+83%

18,360

+341%

Source: Southwestern Energy Financials

Time To Drill(Days)

Wells Per YrPer Rig

AverageLateral Length

(Feet)

30 Day Ave.Prod Rate

(Mcf/d)

Init Prod Additions

Per Rig Per Yr(Mcf/d)

Drill & Complete

Costs ($MM)

Price Affect

Jan-20

08

Apr-2

008

Jul-20

08

Oct-20

08

Jan-20

09

Apr-2

009

Jul-20

09

Oct-20

09

Jan-20

10

Apr-2

010

Jul-20

10

Oct-20

10

Jan-20

11

Apr-2

011

Jul-20

11

Oct-20

11

Jan-20

12

Apr-2

012

Jul-20

12

Oct-20

12

Jan-20

13

Apr-2

013

Jul-20

13

Oct-20

13

Jan-20

14

Apr-2

014

Jul-20

14

Oct-20

14

Jan-20

15

Apr-2

015

Jul-20

15

Oct-20

15

Jan-20

16

Apr-2

016

$0

$2

$4

$6

$8

$10

$12

$14

(Source: EIA Monthly NatGas Report; 5/10/2011 Short Term Energy Outlook; NYMEX)

Domestic WellheadPipeline Imports (Canada)LNG Imports

US$

per

Mill

ion

BTU

EIA Forecast

NYMEX Futures: 05/23/11

2007 WCSB Production Forecast

2006 2007 2008 2009 2010 2011 2012 20137.0

9.0

11.0

13.0

15.0

17.0

19.0

21.0

High Forecast Low Forecast Average

Bcf

/day

WCSB Production Forecast

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20207

9

11

13

15

17

19

21

TCPL LowTCPL ReferenceTCPL HighNEB Reference

TransCanada, NEB

Bcf

/day

BC Propping Up WCSB

Bcfd

2011 2015 2020 20250

2

4

6

8

10

12

14

16

18

BCAlbertaWCSB

Data Source: Navigant

Winter-long CapacityCTN: 2019-20, Expected Demand

Winter-long CapacityCTN: 2019-20, High Demand

2008 Peak Capacity I-5 Corridor

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 0

1000000

2000000

3000000

4000000

5000000

6000000

I-5 Total Firm Peak Day Supply/Demand BalanceLow Base High Peak LNG Underground Storage Pipeline

Year (Nov-Oct)

Mill

ion

Dth

/day

Current Peak Capacity I-5 Corridor

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 0

1000000

2000000

3000000

4000000

5000000

6000000

I-5 Total Firm Peak Day Supply/Demand Balance

Low Base High Pipeline Underground Storage Peak LNG

Year (Nov-Oct)

Mill

ion

Dth

/day

Capacity Projects

21

Pipelines• Southern Crossing Expansion• Palomar• Sunstone• Blue Bridge (reconfigured)• Ruby• Pacific Connector• Pacific Trail• Oregon LNGLNG Terminals

Kitimat LNG (export)Bradwood LandingOregon LNGJordan Cove LNG

Storage FacilitiesMistJackson Prairie

Oregon LNG Bradwood Landing LNG

Jordan Cove LNG

Kitimat LNG

1914 Willamette Falls Dr., #255West Linn, OR 97068

(503) 344-6637www.nwga.org

NWGA Members:Avista Corporation

Cascade Natural Gas Co.

Intermountain Gas Co.

NW Natural

Puget Sound Energy

Spectra Energy Transmission

FortisBC Energy, Inc.

TransCanada’s GTN System

Williams NW Pipeline