Exploring Pipeline Dynamics to Connect New Markets Damien Gaul Industry Economist Office of Oil and Gas Energy Information Administration Damien.Gaul@eia.doe.gov 2nd North America Pipelines Conference Calgary, Alberta February 19, 2009 Energy Information Administration Official Energy Statistics from the U.S. Government 1

Agenda I. A Look at Supply Development – Unconventional Supplies Increase Gas Shales in the United States Changes in Production II. Pipeline Developments How the Regions are Connected Additions to Capacity and Mileage III. Future Construction Requirements – Major Announced Pipeline Expansions Rocky Mountain Developments Northeast Developments IV. Concluding Remarks Agenda

The Natural Gas Industry is Constantly Evolving….. “A lot of the business is now focused on the physical transportation and trading of gas….People haven’t talked about that in a long time. People had been focused on financial markets, hedging, derivatives. What’s happening now is that people are clearly focused on moving physical molecules from one place to another, about pipeline capacity utilization and basis differentials. It’s classic stuff.” -- Rusty Braziel, vice president, Bentek Energy, quoted in Gas Daily (September 16, 2008)

Regional Natural Gas Consumption (trillion cubic feet) 3.5 3.6 3.8 2.5 2.3 2.7 3.0 2.8 2.9 1.3 1.5 1.6 1.5 2.0 0.8 2.4 2.3 5.0 4.9 1.2 1.4 2007 2015 2030 Source: Energy Information Administration, Annual Energy Outlook 2009

U.S. Natural Gas Consumption by Sector, 1990-2030 (trillion cubic feet) History Projections Industrial* Electric Generators Residential Commercial Transportation** * Includes lease and plant fuel ** Includes pipeline fuel Source: Energy Information Administration, Annual Energy Outlook 2009

Natural Gas Supply by source, 1990-2030 (trillion cubic feet) History Projection Unconventional Alaska Net imports Non-associated offshore Associated-dissolved Non-associated conventional Source: Energy Information Administration, Annual Energy Outlook 2009

Gas Shales in the United States Shale Gas Play Basins Marcellus Shale Source: Energy Information Administration, Office of Oil and Gas

Cumulative Unconventional Production, 2007-2030 (trillion cubic feet) 84 West Coast 36 19 14 11 13 3 3 3 Mid-continent Northeast Rocky Mountain 32 6 43 Gulf Coast Southwest Gas Shales Tight Gas 5 3 Coalbed Methane Source: Energy Information Administration, Annual Energy Outlook 2009

Rockies Express Pipeline (REX) Source: Energy Information Administration, GasTran Natural Gas Transportation Information System, Natural Gas Pipeline Projects Database.

Natural Gas Pipeline Capacity Between Regions, 2008 (million cubic feet per day) Western Central 2,643 11,980 4,451 81 3,594 Midwest Northeast 3,016 4,018 3,755 51 4,799 1,495 1,028 268 2,100 4,897 569 897 298 8,898 5,998 5,875 9,267 23,515 614 1,090 Southwest 405 2,491 Southeast 865 Note: Aspect and size relationships among regions are not to scale. Source: Energy Information Administration, GasTran Natural Gas Transportation Information System, Natural Gas Pipeline Projects Database, as of January 2009.

Additions to Pipeline Mileage, 1998-2011 Actual Potential Miles Note: Only projects under construction or approved that were judged to have the most likelihood of being completed in 2009 were included in 2009. Source: Energy Information Administration, GasTran Natural Gas Transportation Information System, Natural Gas Pipeline Projects Database, as of January 2009.

Natural Gas Pipeline Capacity Additions, 1998-2011 Actual Potential Million Cubic Feet per Day Note: Only projects under construction or approved that were judged to have the most likelihood of being completed in 2009 were included in 2009. Source: Energy Information Administration, GasTran Natural Gas Transportation Information System, Natural Gas Pipeline Projects Database, as of January 2009.

Major Potential Natural Gas Pipeline Expansions, 2009-2011 2,400 MMcf/d– Wyoming to Oregon (2 New Pipelines – 2011) 2,300 MMcf/d– Wyoming to Iowa (2 New Pipelines Pipeline – 2010 - 2011) 750 MMcf/d import expansions (2 Projects – 2010) 1,200 MMcf/d– Wyoming to North Dakota (2 New Pipelines – 2010 - 2011) 1,800 MMcf/d– Missouri to Ohio (KM Rockies Express – 2009) 225 MMcf/d capacity expansion to/from Canada (Vector Pipeline 2009-2010) 700 MMcf/d LNG imports (1 Import Pipeline – 2011) 4,700 MMcf/d expansions and new pipelines (7 Projects - 2009-2011) 1,900 MMcf/d Expansions 5 Projects – 2010) 1,400 MMcf/d Local Expansions (6 Projects – 2009 - 2011) 1,632 MMcf/d LNG imports (2 Import Pipelines – 2010-2011) 3,740 MMcf/d from Oklahoma, Arkansas & Texas to Louisiana ( 5 Projects - 2009-2011) 3,690 MMcf/d LNG Import Pipelines (7 projects – 2009- 2011) 8,740 MMcf/d from Southwest to Southeast (12 Projects - 2009-2011) 1,000 MMcf/d Export Pipelines (2 projects – 2010) MMcf/d = million cubic feet per day. LNG = liquefied natural gas. Source: Energy Information Administration, GasTran Gas Transportation Information System, Natural Gas Pipeline Projects Database.

Rocky Mountain Interstate Pipelines Wyoming Interstate Pathfinder (1.2 Bcf ) Northwest Pipeline Ruby Pipeline (1.5 Bcf) Chicago Express (1.5 Bcf) Rockies Alliance (1.2 Bcf) Rockies Express Questar Colorado Interstate Kern River Gas Transmission TransColorado Gas Northwest Pipeline Source: Energy Information Administration, GasTran Natural Gas Transportation Information System, Natural Gas Pipeline Projects Database.

Rocky Mountain Prices and Basis REX-West Cheyenne Plains HurricaneKatrina Recession Kern River Expansion Source: Natural Gas Intelligence, NGI’s Daily Gas Price Index.

Northeast Interstate Pipelines NFG West to East (0.7 Bcf) National Fuel (NFG) Tennessee Gas (TGP) TGP 300 (0.3 Bcf) Transcontinental (Transco) Dominion (DTI) DTI Keystone (1.0 Bcf) REX (1.8 Bcf) Columbia Gas (TCO) Texas Eastern (TETCO) TETCO TEAM (0.3) Bcf) Texas Eastern (TETCO) Source: Energy Information Administration, GasTran Natural Gas Transportation Information System, Natural Gas Pipeline Projects Database.

Northeast Prices and Basis Source: Natural Gas Intelligence, NGI’s Daily Gas Price Index.

I. Shale and other unconventional resource development will drive pipeline expansions for the foreseeable future II. As a result, the pipeline “Renaissance” will continue, although the peak in actual completions might have been reached in 2008 III. Not all pipelines proposals will lead to actual infrastructure –the current economic downturn will have an impact on production and pipeline. Also, many LNG projects are expected to be cancelled in the future. IV. In the Northeast, expansions of existing pipelines will likely address transportation requirements; however, another large infrastructure project may be needed in the Rockies. Concluding Remarks

GasTran - related Publications: Distribution of Natural Gas: The Final Step in the Transmission Process (Released, 6/27/2008, pdf format) This special report analyzes the role of local distribution companies (LDCs) and transmission pipelines in delivering natural gas supplies to end-use customers, focusing upon the years 1996 through 2006. Natural Gas Compressor Stations On the Interstate Pipeline Network: Developments Since 1996 (Released, 11/02/2007, pdf format) This report examines the compression facilities added over the past 10 years and how the expansions have supported pipeline capacity growth intended to meet the increasing demand for natural gas. About U.S. Natural Gas Pipelines (Released, 6/1/2007, html format) This information product provides the reader with a broad and non-technical overview of how the U.S. natural gas pipeline network operates, along with some insights into the many individual pipeline systems that make up the network.