The Energy Resources Imperative:Keeping It Simple

What’s Driving the Imperative:Global Population Growth and Economic Development

World Population Growth1750-2100

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Fuel Selection and Prioritization

Hydrocarbon Combustion:Fuel + Oxygen = Heat + Water + Carbon Dioxide

Heating Value of Coal:Q = 337C + 1442(H - O/8) + 93S

Nuclear Fission:Uranium + Neutron = Fission Materials + Energy + Neutrons

Keeping It SimpleLean Thinking: Produce the Goods and Don’t Produce and Eliminate the “Evils” and Eliminate Waste

Heating Value of Fuels

Fuel HHV MJ/kg HHV BTU/lb HHV kJ/mol LHV MJ/kg

Hydrogen 141.8 61,100 286 121

Methane 55.5 23,900 889 50.0

Ethane 51.9 22,400 1570 47.8

Propane 50.35 21,700 2220 46.35

Butane 49.5 20,900 2875 45.75

Pentane 45.35

Gasoline 47.3 20,400 44.4

Paraffin 46 19,900 16,300

Kerosene 46.2 43.0

Diesel 44.8 19,300

Coal 15–27 8000–14,000   200–350

Wood 15 6500 300

Peat 6–15 2500–6500

It’s a fact

Natural gas is the clean-burning fuel.

• 45 percent less carbon dioxide (CO2) emissions than coal

• 30 percent less CO2 emissions than oil100

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It’s a fact

Direct use of natural gas is very efficient. • 90 percent of the natural gas produced is delivered to

customers as useful energy

• Less than 1/3 of the energy converted to electricity reaches customers

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Inefficiency of electric generation

Electricity Flow, 2006(Quadrillion Btu)

69%

It’s a fact

Using natural gas appliances means less CO2 emissions at home.

ElectricityNatural Gas

10.36 million tons of CO2

6.34 million tons of CO2

Homes using natural gas for heating, hot water and other appliances produce about 40 percent less CO2 emissions than homes with electric appliances.

Energy Efficiency & Conservation

• According to the Energy Information Administration, residential natural gas consumers use 20 percent less gas per capita today than they did 20 years ago, primarily due to more efficient appliances.

• Several states have moved to rate design models where utilities are compensated, not to sell more product, but to educate the public and promote energy efficiency.

Prioritization

• Alternative and renewable energy accounts for 6% of our nation’s energy portfolio; 90% of that is hydroelectric

• Renewable energy is not ready to replace fossil fuels which account for 80% of the world’s energy supply

We must explore and promote renewables while encouraging use of natural gas.

Abundant but inaccessible

50-500 TCF

5-50 TCF

1-5 TCF

0.5-1.0 TCF

0.25-0.5 TCF

0.1-0.25 TCF

0.01-0.1 TCF

All others <0.01

Gas Reserves Across the Globe

Europe & Former Soviet Union 2199 TCF

Middle East 2531 TCF

Africa 496 TCFAsia Pacific 475 TCF

North America 258 TCF

South America 253 TCF

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163

641

668

940

1620

5085 Fields

6243 Fields

TOTAL Gas Reserves 20046,200 TCF (50% Offshore)

Global gas resources wereroughly 60 times the annualvolume consumed in 2003

3,000 TCF of stranded gasworldwide

2,000+ fields worldwide withgas reserves of 0.25 to 5.0 TCF

10 BCF per day of Flared GasWorldwide

Abundant but inaccessible

0 600 1200 1800 2400 3000 Distance to gas consuming market, mi

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• Alternative options for marketing stranded gas – large export consumer markets– combined-commodity projects– creating/developing local or regional market demand

• Distance to market and size of the gas resource influence technologies– Large baseload LNG and Fischer-Tropsch GTL – Technologies can broadly fit together in a framework of production volume versus distance-to-market.

• The “niches” in this framework to exploit for gas fields with modest reserves– CNG– Smaller-scale or “Micro” liquefaction” of LNG– Smaller-scale or “Compact” GTL projects

Looking Offshore in the US

Potential recoverable natural gas in trillions of cubic feet

Looking Onshore in the US

Marcellus and Devonian Shale

2007 Leadership Conference

What element are you?

Natural Gas Value ChainNatural Gas Value Chain

Investing in infrastructure

Investing in efficiency for the today

Investing in efficiency for the future

Common characteristics:• Increased use of automation and digital technologies to continue to improve reliability, efficiency and service; • Functional area process and technology investments made as part of common interlocked utility IUN strategy; • Common information architecture, IT and communications infrastructures, common processes and common

standards across the utility; • Common governance models required to manage IUN investments; • More real-time network observe-ability smart sensors, monitors and meters; • Tighter linkage between customers, assets and grid operations with increased customer control, services and

options; and • Increased use of analytics for decision support and automation.

Intelligent Utility Network

What’s else is next?

• U.S.-based venture capital investments in energy technologies increased from $716 million in 2004 to $917 million in 2005. As a percent of total VC investment, energy tech increased from 3.3% in 2004 to 4.2% in 2005. Over the last six years, venture investments have more than quadrupled as a percent of total VC investments, increasing from under 1% of total venture investments in 1999 to last year’s 4.2%.

• In 2005, the average energy-tech investment swelled to $10.9 million, from $8.4 million in 2004, the highest level since 2001.

• The International Energy Agency estimates that a total of $630 billion was invested in the energy industry during 2005, of which 7% or $44 billion was spent on renewable and distributed energy technologies.

• Annual investments in new installations of clean energy, both renewable and distributed, is expected to grow from about $44 billion in 2005 (it was $27 billion in 2004) to about $167 billion in 2015, a four-fold increase.

• Key developments will include: Increased growth of purely energy-focused

VCs; Traditional VC firms adding energy and energy

technology as an investment sector to their portfolios;

Increased investor sophistication as the energy industry receives more publicity and goes mainstream;

Investors will begin to differentiate and subcategorize the industry into investment segments such as

Distributed Generation Power Quality Services-Related Software

Applications.

Investment Percentage of Venture Capital in EnergyUS-Based Venture Investment by Sub-Sector

Distributed Energy Investments