Outlook on Natural Gas and LNG

Fuel Diversity in New England Recent build-out ~10,700 MW Gas-fired generation (% Total NE GWh) –1999: 16% –2003: 41% –2010: 49%

2002 Study: Gas-fired Generation (2004/5) MW AlgonquinIroquoisM&NPNGTSTennessee

North American Natural Gas Supply Reserves Total: Tcf Sources: EIA, CAPP, Potential Gas Committee, NEB Resource Base Total: 1,789 Tcf Gulf Coast 293 WCSB 179 Rocky Mountains 175 Mid-Continent 117 Other U.S. Coalbed Methane 169 Reserves Atlantic Canada (Scotian Shelf) WCSB 56.7 Rocky Mountains 55.5 Other 26.5 Atlantic Canada Mid- Continent 43.1 Gulf Coast 64.3

Gas Sources and Supplies Large resource base in North America (1,789 Tcf) Focus on converting resources to reserves and production Gulf Coast + U.S. mid-continent + WCSB ~ 75% of North American production Traditional producing basins experiencing depletion effects –Natural decline in reservoir/field production –Most fields are facing an onslaught of accelerated depletion –“Treadmill” effect –No more “low hanging fruit”

Maturation of Existing Production Basins Running hard to maintain production levels –Gulf Coast Onshore and shallow water production flat to declining –Western Canada (WCSB) Declining production from shallow wells in the east Growth from deeper, more expensive wells –Atlantic Canada Long-term potential Recent reassessments

Drilling v. Production # of Wells Drilled Bcf/d Development/ExplorationSupply Source: EIA

U.S. Natural Gas Production History Indicates 28% 2003 Decline Rate Source: IHS Energy, Petroleum Information Corporation, EOG Resources

E&P in Atlantic Canada Current Scotian Shelf production relatively small –Sable Island: Bcf/d –Gulf Coast:26.3 Bcf/d –Western Canada:16.5 Bcf/d High costs, difficult reservoir conditions Recent setbacks: –Postponement of Deep Panuke –Downward revisions of proven reserves –Lack of new exploration success

Sable Island Production

Henry Hub Historical Prices and Forwards JanFebMarAprMayJunJulAugSepOctNovDec (with NYMEX futures) 2003 Source: Bloomberg

Spark Spreads During New England Cold Snap -$600 -$400 -$200 $0 $200 $400 $600 $800 $1,000 01/12/0401/13/0401/14/0401/15/0401/16/0401/17/0401/18/0401/19/04 $/MWh Day AheadReal Time Source: ISO-NE

The LNG Supply Challenge Source: TransCanada

U.S. LNG Imports by Source Country, Source: EIA

Quarterly LNG Deliveries Source: EIA, U.S. Natural Gas Imports and Exports: Issues and Trends 2003

Major LNG Trade Movements, 2002 (Bcf) Source: EIA, The Global Liquefied Natural Gas Market: Status and Outlook

Atlantic Basin Liquefaction Capacity, October 2003 Source: EIA, The Global Liquefied Natural Gas Market: Status and Outlook

Atlantic Basin LNG Market Dynamics Revitalized Atlantic Basin supply locations Integration of the LNG supply chain Crunch on traditional supply has caused a proliferation of new projects Trend towards commoditization –Global market –Flexibility in charters –Increased array of transportation options

Interstate Pipelines Serving New England Total Deliverability over 4.0 Bcf/d

Distrigas LNG New Mystic (272 MMcf/d) Backup for New Mystic LDC LNG Terminals KeySpan, Algonquin Tennessee Distrigas Everett LNG Terminal Storage Capacity: 3.5 Bcf Daily Vaporization: 1 Bcf LNG Imports (158.3 Bcf in 2003) (150 MMcf/d)

Satellite LNG Tanks in the Greater Northeast Source: EIA, GasTran Gas Transportation System, LNG Facilities Database Everett Import Facility 3.5 Bcf 1.0 Bcf/d Total Vaporization Capability 115 MMcfd - Truck

Proposed LNG Projects Serving the Northeast ProjectLocation Deliverability (MMcf/d) Cacouna EnergyReviere-Du Loup, QC500 Rabaska ProjectQuebec City, QC500 Bear HeadPoint Tupper, NS CanaportSt. John, NB Northeast Gateway Energy Bridge Hubline, MA400 Weaver’s CoveFall River, MA400 KeySpan LNGProvidence, RI500 Broadwater EnergyLong Island, NY1000